CA Foundation · Quantitative Aptitude · Mathematics of Finance
An investment of ₹10,000 grows to ₹13,310 in 3 years with annual compounding. What is the CAGR of the investment?
The CAGR is 10% per annum. The investment grew by a factor of 1.331 over three years, and 1.1 cubed equals 1.331, so a constant compounded return of 10% each year explains the growth.
- A11%
- B10%Correct
- C9%
- D12%
Explanation
13,310/10,000 = 1.331 = (1.1)³, so the annual compound growth rate is 10%. Dividing the total gain of 33.1% by 3 gives about 11%, which is wrong because it ignores compounding.
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