What is the formula to figure out "Compound Annual Growth Rate (CAGR)" from absolute returns? Say, if 100% is the absolute return in 5 years tenure, then how would I find what is the CAGR through that 5 years?
1 Answer
Found it after mathematically evaluating it and finding a correlation between the two as -
CAGR = {[(AR+1)^(1/r)]-1}*100
where,
CAGR - Compound annual growth rate
AR - Absolute Return
r - term in number of years
Since AR = [(FV/IV)-1]*100
and CAGR = [((FV/IV)^(1/r))-1]*100
where,
FV - Future Value and
IV - Initial Value