About the Interest Rate Calculator
This calculator solves for the implied annual interest rate given a present value, a future value, and a time period. It answers the reverse question from most interest calculators: not what will this grow to, but what rate does this growth imply?
The formula
r = (FV / PV)^(1/t) − 1PV is the present value, FV the future value, and t the number of years. The result is the compound annual growth rate that connects the two.
How to use this calculator
- 1Enter your Present Value ($). The field starts at
10000, which you can overwrite. - 2Enter your Future Value ($). The field starts at
15000, which you can overwrite. - 3Enter your Number of Years. The field starts at
5, which you can overwrite. - 4Read the result straight away — it recalculates as you type, so there is no button to press. Use Share to copy a link that reopens the page with your exact numbers filled in.
Worked example
| Input | Value |
|---|---|
| Present Value ($) | 10000 |
| Future Value ($) | 15000 |
| Number of Years | 5 |
Result
Annual Interest Rate: 8.4472%
Monthly Rate: 0.6781%
Total Return: 50.00%
Total Gain: $5,000.00
Those are the values the page loads with, so you can reproduce this result yourself and then change one field at a time to see what drives the outcome.
Understanding your result
This is the compound annual growth rate, and it is the honest way to describe any investment's performance. Growing 10,000 to 15,000 over five years is a 50 percent total return but only 8.45 percent annually — and the annual figure is what lets you compare it against alternatives.
CAGR smooths out volatility, which is both its strength and its limitation. It tells you the equivalent steady rate that would have produced the same outcome, but says nothing about the path. Two investments with identical CAGR can differ enormously in how uncomfortable they were to hold.
Things worth knowing
- CAGR ignores volatility. Two investments with the same CAGR can have very different risk profiles.
- For an investment with deposits or withdrawals along the way, use IRR or money-weighted return instead.
- Subtract inflation to get the real rate of return, which is what determines purchasing power.
- Beware short measurement periods. A one-year CAGR is just a one-year return and predicts little.
- Compare against a relevant benchmark. An 8 percent CAGR is good or poor depending on what the market did.
Frequently asked questions
What is CAGR?+
Compound annual growth rate — the constant annual rate that would take a starting value to an ending value over a given period. It converts a total return into a comparable annual figure.
How do I find the rate of return on an investment?+
Divide the ending value by the starting value, raise to the power of one over the number of years, and subtract 1. Growing 10,000 to 15,000 in five years gives about 8.45 percent per year.
What is the difference between CAGR and average annual return?+
CAGR compounds and reflects the actual outcome. A simple average of annual returns overstates performance when returns are volatile, because losses hurt more than equivalent gains help.
Should I use nominal or real rates?+
Nominal for comparing investments against each other, real — nominal minus inflation — for judging whether your purchasing power actually grew. Over decades the difference is substantial.