Mrs Rathna invested Rs 2 lakh in an enterprise for 5 years. Her compound annual growth rate (CAGR) turned out to be 20.5%. The end balance would be: (given \((1.205)^5=2.54\))
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 5.08 lakh
The CAGR is the constant yearly rate at which the beginning balance grows to the end balance:
\(\text{End balance} = \text{Beginning balance} \times (1 + \text{CAGR})^n\)
\(= 2 \times (1.205)^5\)
\(= 2 \times 2.54 = 5.08\)
So the end balance is Rs. 5.08 lakh.