How CAGR Calculator Works & Mathematical Formula
Calculate Compound Annual Growth Rate (CAGR) for investments, stocks, revenue, or portfolio growth. Our online engine computes high-precision results in real-time right in your browser without transmitting your personal information over external servers.
Standard Mathematical Formula:
$$\text{CAGR} = \left(\frac{\text{Final Value}}{\text{Initial Value}}\right)^{\frac{1}{\text{Years}}} - 1$$
Step-by-Step Calculation Example
An initial investment of $10,000 growing to $25,000 in 5 years has a CAGR of: (25000 / 10000)^(1/5) - 1 = 20.11% per year compounded.
Frequently Asked Questions
What is Compound Annual Growth Rate (CAGR)?
CAGR measures the annual growth rate of an investment over a period of time longer than one year, assuming the profits are reinvested at the end of each year.
How does CAGR differ from average annual return?
Average annual return ignores the compounding effect and volatility, whereas CAGR gives a smoothed annual rate that accounts for compounding over the entire duration.