CA Foundation · Quantitative Aptitude · Mathematics of Finance
The sales of a company grew from ₹2,00,000 to ₹2,88,000 in 2 years. What is the compound annual growth rate (CAGR)?
The CAGR is 20% per annum. Sales grew by a factor of 1.44 over two years, and since 1.2 squared equals 1.44, the constant yearly growth rate compounding to this result is 20%.
- A20%Correct
- B22%
- C44%
- D18%
Explanation
(2,88,000/2,00,000) = 1.44 = (1+g)². So 1+g = 1.2 and g = 20%. The option 22% comes from taking the simple average of 44% total growth over 2 years, which ignores compounding, and 44% is the total growth.
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