The cagr of an investment over 5 years, is 6%. what does this mean?
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cagr stands for compound annual growth rate. When people invest money for long periods, they can adopt different methods of calculating interest. Simple interest and compound interest are the common ones. In case of cagr, it is assumed that the investment earns an interest rate that is equal to compounded interest for the given period. A 6% cagr over 5 years means that your initial invest earns an interest rate of 6% annually and you investment will grow by 6% every year and it will continue to earn the same interest for all the five years. So at the end of 5 years, your initial investment will have grown by 30% ( 6% x 5 years)
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