If an investment of ₹ 10,000 becomes ₹ 60,000 in 4 years, then the Compound Annual Growth Rate (CAGR) is :
Answer: The Compound Annual Growth Rate (CAGR) is approximately .
Step-by-step solution
Step 1: Understand the Compound Annual Growth Rate (CAGR) Formula
The Compound Annual Growth Rate (CAGR) is a financial metric that calculates the annual rate of return over an investment period, assuming the profits are reinvested. It provides a smoothed annual growth rate, ignoring volatility.
Step 2: Identify the given values
From the problem statement, we can identify the initial investment as the beginning value, the final amount as the ending value, and the duration of the investment as the number of years.
Step 3: Substitute the values into the CAGR formula
Now, we substitute the identified beginning value, ending value, and number of years into the CAGR formula. This sets up the calculation for the growth rate.
Step 4: Calculate the CAGR
First, simplify the fraction inside the parenthesis. Then, calculate the fourth root of the result. Finally, subtract 1 from this value to get the CAGR as a decimal, which can then be converted to a percentage.