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How to Annualize a Percent

Original post by Matt McGew of Demand Media

Annualizing a percent allows you to estimate the annual rate of return for a percent calculation that covers a shorter duration of time such as a month or quarter. While annualizing a percent does not guarantee that the actual annual percent will equal the estimated annualized figure, performing this calculation can provide you with a basic estimate. Investors and businesses commonly use this calculation to make projections.

Step 1

Determine the percent you want to annualize. For example, assume an investment has a monthly return of 3 percent.

Step 2

Determine the number of periods needed to annualize the percent from Step 1. For example, a monthly return would have a multiplier of "12" and a quarterly return would have a multiplier of "4".

Step 3

Multiply the percent by the multiplier. Continuing the earlier example, .03 multiplied by 12 equals 36 percent. This figure represents the annualized percent.

                   

References

  • "Principles of Finance"; Scott Besley and Eugene Brigham; 2008

About the Author

Since 1992 Matt McGew has provided content for on and offline businesses and publications. Previous work has appeared in the "Los Angeles Times," Travelocity and "GQ Magazine." McGew specializes in search engine optimization and has a Master of Arts in journalism from New York University.

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