See Also: Compound Annual Growth Rate(money)
Compound Growth Rate(money)
Compound Annual Return(money)
excess annual growth(medicine)
Simple compound growth method(money)
Simple compound growth method(finance)
Annual percentage rate (APR)(finance)
Annual Percentage Rate(money)
Annual rate of return(finance)
Annual rate of return(money)

Compound Annual Growth Rate (money)


Definition: [crh] Annual return calculated based on each year's previous balances where each previous balance includes both the original principal and all interest accrued from prior years. Best defined by exampDefinition: le. If you invest $100 today and make 5% in the first year and reinvest ($105) and make 8% in the second year, the compound annual growth rate is 6.489%. The calculation is $100x1.05x1.08=$113.4 which is what you end up with at the end of year two. The average return is [Definition: square root(113.4/100) -1]= 0.06489 or 6.489%. Note 1. If we had three compounding periods we would take the cubic root (power of 1/3). Note 2. If we had Definition: invested">invested at exactly 6.489 in both periods, we get $100x1.06489x1.06489=$113.4. Note 3. The example is directed to a return - but CAGR could be applied to earnings growth, GDP growth, etc.