Vishal invested Rs. 20,000 in Tata stocks for 6 years. The value of the investment at the end of each year is given below:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 |
| Rs. 20,000 | Rs. 23,500 | Rs. 24,000 | Rs. 24,800 | Rs. 25,000 | Rs. 28,000 |
The CAGR % of his investment is: [use \( (1.4)^{1/6}=1.058 \)]
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 5.8%
CAGR uses only the beginning value, the ending value and the number of years n:
\( \displaystyle \text{CAGR}=\left(\frac{\text{Ending value}}{\text{Beginning value}}\right)^{\frac{1}{n}}-1 \)
The amount invested was Rs. 20,000 and the value after 6 years is Rs. 28,000 (the given hint uses n = 6):
\( \displaystyle \text{CAGR}=\left(\frac{28000}{20000}\right)^{\frac{1}{6}}-1 \)
\( \displaystyle =(1.4)^{\frac{1}{6}}-1 \)
\( \displaystyle =1.058-1 \)
\( \displaystyle =0.058 \)
So the CAGR is 5.8%. The values in between do not affect it.
CBSE Applied Mathematics (Class XII):
Compound Annual Growth Rate
