How to Annualize a Percentage

Annualizing a percentage means converting a percentage value from one period (such as a month or a quarter) to an annualized rate. This is useful when comparing different investment returns or when calculating the total return on an investment over a year.

To annualize a percentage, follow these steps:

1. Convert the percentage to a decimal by dividing it by 100. For example, if the percentage is 5%, then the decimal value is 0.05.

2. Determine the time period for the percentage. For example, if the percentage represents the return on an investment for one month, then the time period is one-twelfth of a year (since there are 12 months in a year).

3. Multiply the decimal value by the number of time periods in a year. For example, if the decimal value is 0.05 and the time period is one-twelfth of a year, then the annualized rate is 0.05 x 12 = 0.60, or 60%.

So, in this example, a 5% monthly return would be equivalent to an annualized rate of 60%.