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June 13, 2008 1:41 PM   Subscribe

I am useless at mathematics. If company A grows at 5% a month, how much bigger is it after one year?

Answers in percentage terms
posted by dydecker to Society & Culture (7 answers total)
 
If we say that it starts at "1", you would use this formula to calculate it:
1*1.05*1.05*1.05*1.05*1.05*1.05*1.05*1.05*1.05*1.05*1.05*1.05
The result is 1.8

Of course, seeing company growth stated in monthly terms rather than annual terms is kind of unusual.
posted by adamrice at 1:49 PM on June 13, 2008


Or to answer in percentage terms, 80% bigger (technically more like 79.5%).
posted by adamrice at 1:50 PM on June 13, 2008


Cheers, adam!
posted by dydecker at 1:51 PM on June 13, 2008


For a more formulaic response, you can use the compounded interest formula to determine your answer. It's all over the web, but here is an example.
posted by mcarthey at 1:55 PM on June 13, 2008


(1+0.05)^12=~1.8.
If you must use percentage:
1.8-1=.8
=80%
Or you can just do what Adamrice said.
posted by acoutu at 1:56 PM on June 13, 2008


There's a really neat rule that you can use, called "The Rule of Seventy-Two". It is just an approximation, but it's a really neat approximation. All you need to remember is the number 72.

When talking about compound interest (usually expressed in % increase per year, but per month doesn't matter) you can figure out "How long does it take to double my money" via this rule.

You do 72 divide by the percentage interest, which in this case is 72/5, or 14.4.

So it will take approximately (this is very approximate!) 14 months to double the value of the company.
posted by Jerub at 5:33 PM on June 13, 2008 [2 favorites]


Just to be a mathematical pedant, you would need to make sure the company wasn't saying they were growing at a 5% annualized rate per month. Meaning that if they sustain that growth for a whole year, it would end up being 5% for the whole year.
posted by gjc at 6:19 PM on June 13, 2008


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