![]() Let’s learn how to write the CAGR function ourselves in Google Sheets and later test out the function with actual numerical values. This function can be applied to many fields, including economics, biology, and statistics. This financial use case is just one of the many applications of the CAGR function in Google Sheets. With the CAGR formula function, it becomes quite easy to determine the real average rate of return of an investment per period for each of your stock investments. We have a record of the initial investment of each stock, as well as the current value of each investment. You want to find out which stock, on average, has the highest annual rate of return. You are investing in a few companies in the stock market. Let’s begin with a quick use case of the CAGR formula. We then subtract one from that result to achieve the final output. The formula effectively raises the ratio of B and A to the power of (1/n). The value of n corresponds to the number of periods for which you are calculating the average. The formula for CAGR is the following: B / A ^ (1/n) -1ī refers to the end value, and A refers to the starting value. With the CAGR formula, we would instead get a real average rate of 19.26%. ![]() In real life, the growth rate is applied to the principal amount and any interest gained during the year. This value, however, does not take into consideration the compounding effects of investments. ![]() For example, if we have three successive annual growth rates of 25%, 15%, and 18%, we would come up with an average of 19.3%. This formula is much more accurate than getting the average of successive growth rates. ![]()
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