Compound Average Annual Growth Rate

[PatJennings]

Can someone help define the formula to calculate the compound average growth
rate (CAGR) starting with an initial amount which grows or shrinks depending
upon the earnings for the year? Is the formula included in the formulae
included in Excel?

That data is in columns:
A: Year
B: Year's average interest rate growth or loss
C: Value of investment, e,g. starting at $1,000 and changing each year by
the rate in column B.
D: The CAGR effective to that year.

Thank you for your assistance.

Pat

 

[J Sedoff comRemove>]

What is the CAGR formula (I don't believe I've heard of it before)? Have you
looked at the formulas provided under the "Financial" category in the "Insert
Function" window?

Is it something like the following?
ISPMT(rate,per,nper,pv)

- Rate is the interest rate for the investment.
- Per is the period for which you want to find the interest, and must be
between 1 and nper.
- Nper is the total number of payment periods for the investment.
- Pv is the present value of the investment. For a loan, pv is the loan
amount.

Jim

 

[PatJennings]

It is solving for the rate of return. Rate is the result, not an input
item. In my note I asked if anyone knew of a formula providing the result
but listed under another name in the included worksheet functions.

Here is an example of how the rate would be calculated.
Say you made a single investment in some sort of fund, etc. The first year
showed a gain of 5%, the second -3%, fourth +25%, fifth + 6.8%, etc. etc.
What I am looking for is the average annual rate of return over the period
of time.

No one has answered the question so far.

 

[Fred Smith]

To answer your question, RATE and XIRR are the functions which calculate
CAGR.

You can use RATE in your situation because you don't have multiple cash
flows. Simply do the following:

1. Calculate the ending value of your investment (PV*(1+i1)*(1+i2)...)
2. Use the Rate function to calcuate your CAGR.

The formula for Excel's regular financial functions is given in Help under
the PV function.
If you want to know how XIRR works, Google "Newton Raphson"

Regards,
Fred.

It is solving for the rate of return. Rate is the result, not an input
item. In my note I asked if anyone knew of a formula providing the result
but listed under another name in the included worksheet functions.

Here is an example of how the rate would be calculated.
Say you made a single investment in some sort of fund, etc. The first
year showed a gain of 5%, the second -3%, fourth +25%, fifth + 6.8%, etc.
etc. What I am looking for is the average annual rate of return over the
period of time.

No one has answered the question so far.