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While calculating a yield or growth rate for a single-premium investment is relatively straightforward, calculating an average growth rate based on a regular monthly contribution is more difficult. In effect it is more of a very close approximation.

For instance, if you were to pay £50 per month into a savings plan for ten years and at year ten it was worth £10,000, in order to calculate the true growth rate exactly, you would need to calculate the number of units purchased each month, then track the growth of those specific units for the remainder of the term. This would effectively entail a polynomial order of 120 separate calculations to solve.

Also you would need accurate details of each payment, and assuming you actually had all the information, it would still be a time-consuming task. Therefore, if this is not possible, the alternative method is to use an iterative approach, incorporating the Newton-Raphson root-finding method (similar to methods used in Excel functions such as RATE). This is the method used by this calculator.

The figures projected by the calculator are only for guidance purposes, and are by no means guaranteed.

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