1. ## CAGR Question...

Hello!

I need some help with a growth rate problem (bare with me, I'm bad with math...)

Ok:

I'm trying to figure out how to calculate something...

In year 1, say I have $1916.4612 In year 6, I have$2448.1061
I have a calculated a CAGR of 4.16%
((1916.4612/2448.1061)^(1/6))-1

So, if I want to estimate the amount for year 7... can I just take $2448.1061 x 4.16% to get$2550.0690? I'm not sure if that's right...

2. Hi there

You should consider the following model

$A = P\left(1+\frac{r}{100}\right)^n$

Where A is the annuity (the expected return), P the principal (initial amount invested), r is the rate and n is the term (or number of years invested).

The only question I have is, have you invested for 5 years or 6? If your beginning was the start of year one and the end was the start of year 6 then this would be $n= 5$ years. If your end point was the end of year 6 then you would have $n=6$.

Here is my attempt with $n = 5$

You have

$2448.1061 = 1916.4612\left(1+\frac{r}{100}\right)^5$

$\frac{2448.1061}{1916.4612} = \left(1+\frac{r}{100}\right)^5$

$\sqrt[5]{\frac{2448.1061}{1916.4612}} = 1+\frac{r}{100}$

$\sqrt[5]{\frac{2448.1061}{1916.4612}} -1= \frac{r}{100}$

$100\times \left(\sqrt[5]{\frac{2448.1061}{1916.4612}} -1\right)= r$

$r = 100\times \left(\sqrt[5]{\frac{2448.1061}{1916.4612}} -1\right)$

This will give you the required rate. After you have this you can solve for the next year by substituting the value into r below. (Once again dependant on that start year/end year condition)

$A = 1916.4612\left(1+\frac{r}{100}\right)^6$

3. Originally Posted by valerie142814
Hello!

> I need some help with a growth rate problem (bare with me, I'm bad with math...)

Should be "bear with me"!

> In year 1, say I have $1916.4612 > In year 6, I have$2448.1061
> I have a calculated a CAGR of 4.16%
> ((1916.4612/2448.1061)^(1/6))-1

Keerect! Well done.

> So, if I want to estimate the amount for year 7... can I just take
> $2448.1061 x 4.16% to get$2550.0690? I'm not sure if that's right...

Yes...but the multiplication would be 2448.1061 * 1.0416 ; kapish?

As a matter of fact, that's how the 1916.4612 grew to 2448.1061:
1916.4612 * 1.0416 * 1.0416 * 1.0416 * 1.0416 * 1.0416 * 1.0416 = 2448.1061
.