CAGR Calculator

How to Use the CAGR Calculator

This calculator helps you determine the Compound Annual Growth Rate (CAGR) of an investment based on its initial value, final value, and time period.

The CAGR Formula

The CAGR calculator uses the following formula:

CAGR = (FV / PV)^(1/n) - 1

Where:

• CAGR = Compound Annual Growth Rate
• FV = Future Value (Final Investment Value)
• PV = Present Value (Initial Investment Value)
• n = Number of Years

Calculation Steps

1. Enter the Initial Value (PV) of the investment
2. Input the Final Value (FV) of the investment
3. Specify the Number of Years (n) for the investment period
4. The calculator applies the formula: CAGR = (FV / PV)^(1/n) - 1
5. The result shows the Compound Annual Growth Rate (CAGR) as a percentage

Example Calculation

Let's walk through an example calculation:

Given:

• Initial Value (PV): $10,000
• Final Value (FV): $16,105
• Number of Years (n): 5

Step-by-Step Solution:

1. Apply the formula: \(CAGR = (16,105 / 10,000)^{(1/5)} - 1\)
2. Calculate the power term: \((16,105 / 10,000)^{(1/5)} = 1.1\)
3. Subtract 1: \(1.1 - 1 = 0.1\)
4. Convert to percentage: \(0.1 * 100 = 10\%\)

Therefore, the Compound Annual Growth Rate (CAGR) is 10%.

Visual Representation

The following diagram illustrates how the investment value grows over time at the calculated CAGR:

Note: CAGR assumes a steady growth rate over the entire period, which may not reflect year-to-year fluctuations in actual returns.