Read the two statements and choose the correct option.
I. A firm's sales rise 20% one year and fall 20% the next, so the average of the two yearly growth rates is 0%.
II. Over those two years the firm's CAGR is also 0%.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

I: $\frac{20\% + (-20\%)}{2} = 0\%$ . True.
II: sales end at $1.2 \times 0.8 = 0.96$ of the start, a fall, so the CAGR is negative, about $-2\%$ . False.

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

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

Read the two statements and choose the correct option.I. A firm's sales rise 20% one year and fall 20% the next, so the average of the two yearly growth rates is 0%.II. Over those two years the firm's CAGR is also 0%.