Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. Join them; it only takes a minute:

Sign up
Here's how it works:
  1. Anybody can ask a question
  2. Anybody can answer
  3. The best answers are voted up and rise to the top

I have an asset that I purchased at $440K. 5 years later, I sell this asset at $725K.

How do I compute the annual percentage yield that I have been getting over the past 5 years from this asset?

share|improve this question
Were there any dividends or payments given by the asset? By yield do you mean merely your annualized rate of return? – JB King Jun 28 '14 at 7:49
Nope. No dividends. Just what I paid in for and what I got out with. – Calvin Cheng Jun 28 '14 at 7:56
up vote 6 down vote accepted

Applying some simple Math:

$725,000/$440,000 = 1.6477272727272....

So, your cumulative return is 64.8% if I round to 3 digits.

Now, if I take the 5th root of 1.648, I get approximately 1.1050742047085970060712045917364

So, your annualized rate of return is 10.5%.

share|improve this answer
Double rounding? – Chris Degnen Jun 28 '14 at 12:11
@ChrisDegnen - I thought to comment on this as well. I've seen students using log tables that only have 2 significant digits and result in calculations concluding that 2^5 = 30. I tell them to round only the final result, not interim steps. – JoeTaxpayer Jun 28 '14 at 14:28
@JoeTaxpayer: especially since the unrounded intermediate result is just sitting there in your calculator, waiting to be 5th rooted. It's actually more work to round it... – DJohnM Jun 28 '14 at 15:43

A1 = A0 + rA0

A2 = A0 + rA0 + r(A0 + rA0) = A0 + 2rA0 + r^2A0 = A0(1 + r)^2

At = A0(1 + r)^t

r = (At/A0)^1/t - 1

r = (725/440)^1/5 - 1 = 10.5%

share|improve this answer
Is someone out there allergic to simple algebra? – mistermarko Jun 28 '14 at 19:30
Maybe if you put in some explanation it would help. – soakley Jun 29 '14 at 21:03

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.