An example
With a deposit account, like a savings account or CD, the interest rate is usually easy to find. This calculation is much more useful for investment vehicles whose returns vary from year to year, such as stocks and mutual funds.
For example, let's say that you invested $10,000 into a mutual fund three years ago, and your account's value is now $12,500. So, divide $12,500 by $10,000 and raise the result to the one-third power using your calculator's exponent key, and then subtract one.
Rate of return = ((12,500 ÷ 10,000) ^ (1 ÷ 3)) – 1 = 0.077