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Which of the following statements are correct about the compound annual growth rate (CAGR) ?

A. CAGR is a compounded annual return of an investment.

B. CAGR is calculated by using the final and beginning value of an investment.

C. CAGR can be used to calculate and communicate the average growth of a single investment.

D. CAGR can be used to demonstrate and compare the performance of investment advisors.

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 4

CAGR is the smoothed compounded annual return computed from only the beginning and ending values over a stated period, so A and B hold. It is routinely quoted both to describe the average growth of a single investment and to compare portfolios or the track records of advisors, so C and D hold as well.

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