Calculating average growth rate is now easier

Average growth rate is a financial term that refers to technique used to estimate rate of return on investment
A representational image. — Pixabay
A representational image. — Pixabay

Calculating the average growth rate of return on investment (ROI) during specific time frame has become now easier than ever with Microsoft Excel, the procedure involves a few simple steps.

Steps to calculate average growth rate

1. Format Data

  1. Label your columns: In column A, label the first cell as "Year," column B as "Amount," and column C as "Growth Rate."
  2. Add the years: List each year of your investment in column A, starting from the second row.
  3. Add investment values: Enter the corresponding investment amounts in column B for each year.
  4. Set number formatting: Format column A as a date, column B as currency, and column C as percentages.

2. Calculate Yearly Growth Rate

  1. Double-click cell C3: This is where you'll calculate the growth rate for the first year.
  2. Enter the formula: Type or input the formula =(B3-B2)/B2 into cell C3 to calculate the annualised yield rate.
  3. Press Enter or Return: This displays the growth rate for the first year.
  4. Apply the formula: Drag the formula down to apply it to the remaining cells in column C.

3. Calculate Average Growth Rate

  1. Double-click a blank cell: Select a cell in a different column to display the average growth rate.
  2. Use the AVERAGE function: Enter the formula =AVERAGE(C3:C20) (replace C20 with the actual last cell containing a growth percentage) to calculate the average growth rate.
  3. Press Enter or Return: The average growth rate of your investment will appear in the cell.