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How do you calculate compound annual growth rate (CAGR)?

In order to calculate the compound annual growth rate (CAGR) of an investment, you require the following: Take the future investment value (FV) and divide it by its present value (PV). Raise the resulting figure to the power of 1 divided by the number of years the investment is for (n). Subtract 1 from the result.

What is the compound annual growth rate of a $1000 investment?

In that example, your initial $1000 investment grew to $1300 over three years (from May 2015 to May 2018). So the compound annual growth rate of that investment was: CAGR = (1300/1000)1/3 − 1 = 9.14% Note that 9.14% is less than 30% / 3 = 10.00%. It is due to the compounding of interest.

What is compound annual growth rate?

The compound annual growth rate is a special label applied in the business world to the so-called Geometric Mean. For us investors, it is the percentage which applied equally to every period would leave us with the final amount.

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