A person invested ₹10000 in a stock of a company for 6 years. The value of his investment at the end of each year is given in the following table:
|
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
|
₹11000 |
₹11500 |
₹13000 |
₹11800 |
₹12200 |
₹14000 |
The compound annual growth rate (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%
Initial investment $=10000$
Value after $6$ years $=14000$
Compound annual growth rate formula
$\text{CAGR}=\left(\frac{\text{Final Value}}{\text{Initial Value}}\right)^{\frac{1}{n}}-1$
$=\left(\frac{14000}{10000}\right)^{\frac{1}{6}}-1$
$=(1.4)^{\frac{1}{6}}-1$
Given $(1.4)^{\frac{1}{6}}=1.058$
$\text{CAGR}=1.058-1$
$=0.058$
$=5.8\%$
The compound annual growth rate of the investment is $5.8\%$.