A value grows from $B$ to $E$ over $n$ years. Which formula gives its CAGR?

\frac{E - B}{nB}

Correct answerYour answer

\left(\frac{E}{B}\right)^{n} - 1

Correct answerYour answer

\frac{E}{B} - 1

Correct answerYour answer

\left(\frac{E}{B}\right)^{1/n} - 1

Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

CAGR is the steady yearly rate $r$ with $B(1 + r)^{n} = E$ .
So $1 + r = \left(\frac{E}{B}\right)^{1/n}$ and $r = \left(\frac{E}{B}\right)^{1/n} - 1$ .

Worth noting

$\frac{E - B}{nB}$ is the simple average yearly growth, which ignores compounding.

Ten questions from EMI, CAGR & Depreciation, at your own pace.

Ten questions from EMI, CAGR & Depreciation, at your own pace.

A value grows from BBB to EEE over nnn years. Which formula gives its CAGR?