How it works
CAGR is the constant annual rate that connects two endpoint values. It is useful for putting different time spans on an annualized basis, provided the figures describe a comparable investment or business metric.
The formula
Keep currency, units and time periods consistent. Percentage inputs use percentage points (enter 5 for 5%). Results are rounded only for display; tiny nonzero values may use scientific notation. Undefined ratios are shown as unavailable.
Growth from $25,000 to $40,000 over five years is 60% total growth and a 9.86% compound annual growth rate.
Calculation method
The smoothed path is illustrative. An investment may fall sharply in one year and rise in another while producing the same CAGR. The result does not imply the same return occurred each year.
Interpretation
Use endpoint CAGR when there are no unaccounted-for deposits or withdrawals. New capital changes the ending value without necessarily representing growth. The Investment Return tool offers a simple cash-flow-aware view but is not an IRR engine.
Limitations
A positive beginning value, positive ending value and positive period are needed for the standard formula used here. Negative growth is supported when ending value is still positive. An ending value of zero displays total loss but no standard CAGR.
Method and reference sources
Method and content checked 2026-09-20. These sources provide background, not endorsement or professional certification. The formula and limitations above define this calculator.
- Investor.gov — Compound Interest CalculatorGrowth, contribution and time-horizon context; this site does not forecast investment returns.
- Investor.gov — Understanding FeesInvestment fee and compounding context; enter the terms of your fund or account.
Frequently asked questions
Does CAGR describe the return earned each year?
No. It is the constant annual rate connecting beginning and ending values. It smooths the path and does not capture volatility or interim external cash flows.
What is a worked example for CAGR?
Growth from $25,000 to $40,000 over five years is 60% total growth and a 9.86% compound annual growth rate.