Calculation of CAGR

The 2.29% CAGR was determined from data in Fig. 4 by solving Eq. 1 for the initial Index value of 1887.94 on 12/30/2005 (V0), final Index value of 2,114.29 on 12/31/2010 (VN), and time span of 5 years (N=5).

CAGR = (VN/V0)(1/N) -1

Equation 1

In general, Eq. 1 states that CAGR is the Nth root of a value ratio that’s adjusted to the constant ratio of 1/1.   The terms of Eq. 1 are the root (1/N), the count N, the final value VN, and the initial value V0.  The CAGR is converted to a percentage value by the factor 100.  For example, CAGR = 0.0229 was converted to CAGR = 2.29% by the product 0.0229*100.

Copyright © 2011 Douglas R Knight

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