VIDEO: Formula for the growth factor

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The factor is a simple formula

  • The calculation of the growth factor is based on the laws of a mathematical, geometric sequence. Two successive terms of this sequence must have a constant quotient. This quotient is the growth factor. In the interest calculation one also speaks of the interest factor.
  • That sounds pretty complicated, but it isn't. To calculate the growth factor, you don't necessarily need to know what a geometric sequence is. There is a very simple formula for this. It reads: q = 1+ (p / 100%)
  • Here q is the growth factor, that is what you are looking for and p is the increase or decrease in percent.
  • This formula describes a real growth process. She will e.g. used in the interest calculation to calculate the interest on capital.

How to calculate the growth factor

  • Growth can be positive, i.e. an increase, or negative, a decrease. It is considered to be positive growth if the growth factor q is greater than 1. If q is between 0 and 1, it is a decrease, i.e. negative growth. In the case of negative growth, p must always be less than 100% and becomes negative, i.e. H. the value is given a minus sign.
    • Limited growth - apply the formula correctly

    Unlimited growth, as dictated by the exponential function, comes in reality ...

  • Here is an example of negative growth: You have $ 100. After you've done your shopping, it's only 80 euros. So you still have 80% of the 100% (100 euros starting value) (80 euros of 100 euros). Since 80 <100, calculate 100 - 80 = 20. So p = -20%. So your capital has decreased by 20%. Now plug this into the formula:

q = 1 + (-20% / 100%)

q = 1+ (-0.20)

q = 1 - 0.20

q = 0.80

So the growth factor of your capital is 0.8.

  • Now the positive growth: You have 100 euros again. You meet a friend who will give you back the 100 euros you lent him last week. Now you come back with 200 euros. So your capital has increased by 100% (200 - 100 = 100), p = 100%.

q = 1 + (100% / 100%)

q = 1 + 1

q = 2.

The growth factor is 2.

  • Please also note the following: An increase from 100% TO 200% results in a growth factor of 2 (see example above). An increase of 200% results in (100% + 200% = 300%) a growth factor of 3, because p = 300% - 100% = 200%. This results in:

q = 1 + (200% / 100%)

q = 1 + 2

q = 3

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