Last updated on October 08, 2024

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To calculate the Compound Annual Growth Rate (CAGR), you use the provided initial and final values over a specified period.

The formula for CAGR is:

$$\text{CAGR} = \left( \frac{\text{Ending Value}}{\text{Beginning Value}} \right)^{\frac{1}{\text{Number of Years}}} - 1$$

Let's say the beginning value of an investment is $1,000, and the ending value after 5 years is $2,000.

$$\text{CAGR} = \left( \frac{2000}{1000} \right)^{\frac{1}{5}} - 1 = (2)^{\frac{1}{5}} - 1 \approx 0.1487 \text{ or } 14.87\%$$

So, the CAGR for this investment over 5 years is approximately 14.87%.

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