CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) between an initial investment value and final value over time.
Calculate the Compound Annual Growth Rate (CAGR) of an investment or asset over a given time horizon.
Formula & Method
- CAGR:
(Ending Value ÷ Beginning Value)^(1 ÷ Years) - 1
Worked Example
For an initial investment of $10,000 growing to $25,000 over 5 years:
- Total Gain:
$25,000 - $10,000 = $15,000(150% total growth) - CAGR Calculation:
(25,000 ÷ 10,000)^0.2 - 1 = (2.5)^0.2 - 1 ≈ 20.11%
[!NOTE] CAGR describes geometric average growth assuming annual compounding. It does not account for intermediate cash inflows or outflows during the holding period.
Frequently Asked Questions
What is CAGR (Compound Annual Growth Rate)?+
CAGR represents the constant annual rate of return required for an investment to grow from its beginning balance to its ending balance over a specified time period.
What is the CAGR formula?+
CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1.
Does CAGR reflect annual volatility?+
No. CAGR smoothes out annual fluctuations to provide a single annualized growth figure assuming steady compounding.