Mrs Vandana invested ₹35000 in a shares of a company and reinvested the earnings every year in buying the shares of the same company. At the end of 5 years, the value of shares increased to ₹56000. Calculate the compound annual growth rate of her investment.
Answer & explanation
Correct answer: option 4
The correct answer is option (4) : 9.8%
Given P.V = ₹35000
F.V = ₹ 56000
n = 5 years
So, CAGR =$\left(\frac{F.V}{P.V}\right)^{\frac{1}{n}}-1$
$\left(\frac{56000}{35000}\right)^{1/5}-1$
$= (1.6)^{1/5}-1$
Let $x= (1.6)^{1/5}$
$log\, x =\frac{1}{5}log 1.6$
$=\frac{1}{5}×0.2041$
$= 0.04082$
$x= antilog $ 0.4082 = 1.098$
So, CAGR $= 1.098-1= 0.098$
Hence CAGR $= 0.098×100$%
$= 9.8$%