How to Calculate Capital Growth

Step-by-Step Guide

1. 1

   Step 1: Know the initial investment.

   Lets say you invested $100 in a share of a company.
2. 2

   Step 2: After a month

   So your monthly return can be calculated by a very simple formula.
   
   Return = ((final value
   - initial value) / initial value) , now, this return can be annualized to find yearly return.
   
   The formula stays the same but as we only have a month's data, we need to raise it to the power of 12 as there are 12 months in a year.
   
   So the yearly return would be calculated as follows: (1.05^12)-1 =
   0.7958 =
   79.58% ,, So
   1.87% would be the monthly return and if you raise to to the power 12, we would get 25% as annual return.
3. 3

   Step 3: the share price is $105.

4. 4

   Step 4: So the monthly return would be (105-100)/100 which is equal to 5%.

5. 5

   Step 5: In a similar fashion

6. 6

   Step 6: if we are given annual return and we want to find out monthly return

7. 7

   Step 7: we can do it with the help of the following formula: ((1+r)^(1/n)-1) Here r= annual return; n= number of periods ( 12 in this case)

8. 8

   Step 8: So lets say if annual return is 25%

9. 9

   Step 9: then monthly return would be ((1.25)^(1/12)-1) = 0.0187 = 1.87%.

Detailed Guide

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