An investment of ₹3,00,000 becomes ₹4,50,000 in 5 years, then the compound annual growth rate (CAGR) is equal to: [Given that: $(1.5)^{1/5} = 1.084$]
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 8.4%
Given:
Initial investment: $P = 3,00,000$
Final amount: $A = 4,50,000$
Time: $n = 5$ years
CAGR formula: $A = P (1 + r)^n$
Substitute: $4,50,000 = 3,00,000 (1 + r)^5$
$\frac{4,50,000}{3,00,000} = (1 + r)^5 \Rightarrow 1.5 = (1 + r)^5$
Take fifth root: $1 + r = (1.5)^{1/5} = 1.084$
$r = 1.084 - 1 = 0.084 = 8.4\%$