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: \( (2.5)^{1/3} = 1.355 \)]

Hint:

The CAGR formula assumes steady growth over time and is commonly used for investments.

Answer 1

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: \[ {CAGR} = 35.5\%. \]