Compound growth rate

 

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Compound growth rate

See: Compound Annual Growth Rate



Compound growth rate

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Compound Annual Return

Compound Annual Return

See: Compound Annual Growth Rate


Compound Annual Growth Rate

Compound Annual Growth Rate

Best 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.


Simple compound growth method

Simple compound growth method

Calculating 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 rate

Compound annual growth rate

The average rate at which a particular financial parameter compounds up over a period of years.


Realized compound yield

Realized compound yield

Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and held thus until the bond matures.


Further Suggestions

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Continuous compounding
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