Compound annual growth rate

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Compound Annual Growth Rate (CAGR) is another term for the 'rate of return' or 'interest rate' variable in the formula Present value of a dollar and Future value of a dollar discussed at time value of money. It measures the rate of change in a value between two points in time(t and t0). These equations are basic to the concept of compound interest (see the simpler understanding section).

\mathrm{CAGR}(t_0,t) = \left( \frac{V(t)}{V(t_0)} \right)^\frac{1}{t-t_0} - 1
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