Rahul invested ₹20000 in a mutual fund in year 2018. If the value of mutual fund increased to ₹32000 in year 2023, Then the compound annual growth rate of his investment is: [given that $(1.6)^{\frac{1}{5}} = 1.098$]
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 9.8%
$\text{Initial value}=20000$
$\text{Final value}=32000$
$\text{Number of years}=2023-2018=5$
$\text{CAGR}=\left(\frac{\text{Final value}}{\text{Initial value}}\right)^{\frac{1}{n}}-1$
$=\left(\frac{32000}{20000}\right)^{\frac{1}{5}}-1$
$=(1.6)^{\frac{1}{5}}-1$
$=1.09856-1$
$=0.09856$
$=9.86\%$
The compound annual growth rate is $9.86\%$.