The Correspondence between Monthly and Annual Growth Rate

What is the annual growth rate of a monthly growth rate of 0.5%?

Understanding Growth Rates:

When we talk about growth rates, it is essential to understand the relationship between monthly and annual growth rates. In this case, a monthly growth rate of 0.5% corresponds to an annual growth rate of 6.17%.

Calculating Annual Growth Rate:

To calculate the annual growth rate from a monthly growth rate, we can use the following formula:

Annual Growth Rate = ((1 + Monthly Growth Rate)^12 - 1) * 100

By plugging in the given monthly growth rate of 0.5%, we get:

Annual Growth Rate = ((1 + 0.005)^12 - 1) * 100

Calculating the expression within the parentheses:

(1 + 0.005)^12 = 1.005^12 ≈ 1.0617

Substituting the result back into the formula:

Annual Growth Rate = (1.0617 - 1) * 100 ≈ 0.0617 * 100 = 6.17%

Therefore, a monthly growth rate of 0.5% corresponds to an annual growth rate of approximately 6.17%. This calculation showcases the compounding effect of monthly growth over a year.