CAGR calculator
Annualize a beginning and ending value into CAGR over a chosen holding period.
What this calculator covers
Use this CAGR calculator to turn a beginning value, an ending value, and a holding period into a single annualized growth rate.
CAGR is useful when you want one comparable annual return number even if the real-world path between the start and finish was uneven.
The explanation keeps the growth multiple and annualization step in view so you can audit how the annualized rate was built.
Frequently asked questions
- What does CAGR actually measure?
- CAGR is the hypothetical constant annual growth rate that would take a beginning value to an ending value over a given number of years. It smooths out the year-to-year volatility in the actual path and gives a single comparable rate you can use across different investments or time periods.
- Why does CAGR ignore what happened in between the start and end dates?
- By design — CAGR only uses the starting value, ending value, and number of years. It says nothing about how bumpy or smooth the journey was. A volatile investment and a steady one can produce the same CAGR even though the experience of holding them differs greatly.
- Can CAGR be negative?
- Yes. If the ending value is below the beginning value, the growth multiple is less than one and the resulting annualized rate is negative. This simply means the investment lost value over the holding period on an annualized basis.
- How is CAGR different from average annual return?
- CAGR is a geometric rate — it compounds properly across years and accounts for the effect of losses and recoveries. A simple average of annual returns (arithmetic mean) can overstate performance when returns vary, especially when there are large swings in either direction.
Tool
Run the calculation
Result
RESULT · CAGR
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Primary result
8.15%
$15,000.00 growing to $24,000.00 over 6 years works out to a CAGR of 8.15%.
- Beginning value
- $15,000.00
- Ending value
- $24,000.00
- Total return
- 60.00%
- CAGR
- 8.1484%
Step-by-step solution
- 1.Divide ending value by beginning value to get the full-period growth multiple: $24,000.00 ÷ $15,000.00 = 1.600000.
- 2.Take the 0.166667 power of that multiple to convert the full-period change into a one-year growth factor.
- 3.Subtract 1 from the one-year growth factor to get an annualized return of 8.1484%.
Walkthrough
Visual walkthrough
CAGR converts one start-to-finish change into the steady annual rate that would reproduce the same result over the same number of years.
01
Measure the total growth multiple
$24,000.00 ÷ $15,000.00 = 1.600000
This strips away the dollar units and leaves the total start-to-finish growth ratio.
02
Annualize that growth ratio
1.600000^(1 / 6)
The exponent converts the full-horizon growth multiple into a one-year equivalent growth factor.
03
Read the annualized return
Subtracting 1 from the one-year factor turns the annualized growth factor into the CAGR percentage.
8.15% CAGR