Ram invested Rs. 10,000 in a stock of a company for 6 years. The value of his investment at the end of each year is given below:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 |
| Rs. 10,000 | Rs. 11,500 | Rs. 13,000 | Rs. 11,800 | Rs. 12,200 | Rs. 14,000 |
Then CAGR % of his investment is:
(Given \( (1.4)^{1/6}=1.058 \))
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 5.8%
The compound annual growth rate depends only on the starting value, the final value and the number of years; the values in between do not matter.
\( \displaystyle \text{CAGR}=\left(\frac{\text{Final value}}{\text{Initial value}}\right)^{1/n}-1 \)
Ram invested Rs. 10,000, the final value is Rs. 14,000, and the question says the investment was for 6 years and gives \( (1.4)^{1/6} \), so n = 6:
\( \displaystyle \text{CAGR}=\left(\frac{14000}{10000}\right)^{1/6}-1 \)
\( \displaystyle =(1.4)^{1/6}-1 \)
\( \displaystyle =1.058-1=0.058 \)
\( \displaystyle \text{CAGR}=5.8\% \)
CBSE Applied Mathematics (Class XII):
Compound Annual Growth Rate
