Question

The CAGR of an investment, whose starting value is ₹ 5,000 and it grows to ₹ 25,000 in 4 years, is: [Given $(5)^{0.25} = 1.4953$]

• A. 49.53%
• B. 14.95%
• C. 495.3%
• D. 1.49%

Hint:

Use the formula $\text{CAGR} = \left(\frac{\text{Final}}{\text{Initial}}\right)^{1/n} - 1$ to compute average annual growth over multiple years.

Answer 1

The Correct Option is A

CAGR signifies Compound Annual Growth Rate. It is computed using the formula: \[ \text{CAGR} = \left(\dfrac{\text{Final Value}}{\text{Initial Value}}\right)^{\frac{1}{n}} - 1 \] In this context, Final Value = ₹ 25,000, Initial Value = ₹ 5,000, and $n = 4$ years. \[ \text{CAGR} = \left(\dfrac{25000}{5000}\right)^{\frac{1}{4}} - 1 = (5)^{0.25} - 1 \] Given that $(5)^{0.25} = 1.4953$, CAGR = $1.4953 - 1 = 0.4953$, which is equivalent to $49.53%$. Hence, the correct option is (A).