# What is CAGR? Compound Annual Growth Rate explained

CAGR Example

Now if I give you an example at the beginning of the video that says in the year that my subscribers in one of my YouTube channels have grown at a rate of 10% then my subscribers on your number 2 grow at a rate of 12% year 3. Delta 15% to its 4 to 18% to 5% to 38% to 5%, now I am sure after listing all these figures you must be feeling very excited that WoW its growth customer growth is very fast But then as a channel owner I would be interested to know that my customer base has grown rather than taking five different figs to increase my subscribers on average on an average annually How ever, I now only take interest in a signal figure number representative figure of the increase in customers. This representative figure for development is nothing but to know about CAGR read CAGR I full article including financial examples in detail.

So to understand the meaning of CAGR in a very simplified manner understand that CAGR is actually a representational figure it's not the true average of anything when never calculate CAGR a basic assumption is that whatever profit I get I so really invested at the same rate of return witch I was getting so I'll give you a simple example assume that I invest 100 Ruppe today okay at the and of one year let use say rate of return is 10% at the and of one year I will be getting 110 correct.

if I calculate CAGR here my basic assumption is that the additional 10 rupees which I have got I have an opportunity to reinvest this gen rupee at the rate of 10% only ok now what is my principal amount, my principal amount is not 100 in your one but in year one my principal amount 110 I'm sure this is sounding similar to something and what is that you guessed it right that's nothing but compound interest to know the connection between compound interest vs CAGR let's

Remember the formula for compounded interest which learned we're back in standard 5 we used to be taught in school that FV = PV (1 + r) n, I'm sure for those who hated mathematics are going to quit the article at this very moment ok but try to hang on even if you don't like math earlier you have to like finance because it's all about money so just stay tuned ok so let me repeat it FV = PV (1 + r) n

Whare To Calculate CAGR

CAGR means basically I have to calculate how much as are okay so FV = (1 + r) n something okay so mathematically if I whare to take PV to the LHS then what happens FV / PV (1 + r) n.

Now, this raised the power n on RHS if I whare to transfer it.