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Compound growth rate |
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Compound growth rateSee: Compound Annual Growth RateCompound growth rate Similar MatchesCompound Annual ReturnCompound Annual ReturnSee: Compound Annual Growth Rate Simple compound growth methodSimple compound growth methodCalculating a growth rate by relating terminal value to initial value and assuming a constant percentage annual rate of growth between the two values. Compound Annual Growth RateCompound Annual Growth RateBest defined by example. 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 [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 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. Compound interestCompound interestThe interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan. Compound annual growth rateCompound annual growth rateThe average rate at which a particular financial parameter compounds up over a period of years. Further SuggestionsRealized compound yieldCompound option Discrete compounding compound interest Continuous compounding Compounding period compound reversionary bonus Compounding Compounding frequency Compound tariff Compound interest |
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