Question:
Assume an investment’s starting value is ₹ 20,000 and it grows to ₹ 50,000 in 3 years. Calculate CAGR (Compounded Annual Growth Rate).
[Use: \( (2.5)^{1/3} = 1.355 \)]
Assume an investment’s starting value is ₹ 20,000 and it grows to ₹ 50,000 in 3 years. Calculate CAGR (Compounded Annual Growth Rate).
[Use: \( (2.5)^{1/3} = 1.355 \)]
[Use: \( (2.5)^{1/3} = 1.355 \)]
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The CAGR formula assumes steady growth over time and is commonly used for investments.
Updated On: June 02, 2025
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Solution and Explanation
Step 1: The formula for CAGR is:
\[
{CAGR} = \left( \frac{{Final Value}}{{Starting Value}} \right)^{\frac{1}{{Number of Years}}} - 1.
\]
Step 2: Substitute the given values:
\[
{CAGR} = \left( \frac{50000}{20000} \right)^{\frac{1}{3}} - 1 = (2.5)^{\frac{1}{3}} - 1.
\]
Step 3: Use \( (2.5)^{\frac{1}{3}} = 1.355 \):
\[
{CAGR} = 1.355 - 1 = 0.355.
\]
Step 4: Convert to percentage:
\[
{CAGR} = 35.5\%.
\]
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