Understanding the Percentage Gain Formula

Whether you’re investing in stocks, running a business, or just curious about your savings growth, understanding percentage gain is essential. The percentage gain formula is a fundamental tool in finance and economics, used to measure the increase in value of an investment or asset over a period. This article will delve into the details of the percentage gain formula, explaining how it works and providing examples to illustrate its application.

The Formula

The percentage gain formula is used to calculate the increase in value of an investment as a percentage of the original value. The formula is expressed as:

Percentage Gain=(New Value−Original ValueOriginal Value)×100\text{Percentage Gain} = \left( \frac{\text{New Value} – \text{Original Value}}{\text{Original Value}} \right) \times 100

Breaking Down the Formula

  1. New Value: This is the value of the investment or asset at the end of the period you are measuring.
  2. Original Value: This is the value of the investment or asset at the beginning of the period.
  3. Difference (New Value – Original Value): This represents the absolute increase in value.
  4. Division by Original Value: This step calculates the increase as a fraction of the original value.
  5. Multiplication by 100: This converts the fraction into a percentage.

Example Calculation

Let’s say you invested $1,000 in a stock, and after one year, the value of your investment has increased to $1,250. To find the percentage gain:

  1. Identify the values:
    • New Value: $1,250
    • Original Value: $1,000
  2. Calculate the difference: 1,250−1,000=2501,250 – 1,000 = 250
  3. Divide by the Original Value: 2501,000=0.25\frac{250}{1,000} = 0.25
  4. Convert to a percentage:

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