A compound annual growth rate (CAGR) measures the rate of return for an investment — such as a mutual fund or bond — over an investment period, such as 5 or 10 years. The CAGR is also called a "smoothed" rate of return because it measures the growth of an investment as if it had grown at a steady rate on an annually compounded basis. To calculate a CAGR, use the XIRR function.
If the XIRR function is not available and returns the #NAME? error, install and load the Analysis ToolPak add-in.
How?
- On the Tools menu, click Add-Ins.
- In the Add-Ins available list, select the Analysis ToolPak check box, and then click OK.
- If necessary, follow the instructions in the setup program.
Example
The example may be easier to understand if you copy it to a blank worksheet.
How to copy an example
- Create a blank workbook or worksheet.
- Select the example in the Help topic.
Note Do not select the row or column headers.
Selecting an example from Help
- Press CTRL+C.
- In the worksheet, select cell A1, and press CTRL+V.
- To switch between viewing the results and viewing the formulas that return the results, press CTRL+` (grave accent), or on the Formulas tab, in the Formula Auditing group, click the Show Formulas button.
|
|
| A |
B |
| Values |
Dates |
| -10,000 |
January 1, 2008 |
| 2,750 |
March 1, 2008 |
| 4,250 |
October 30, 2008 |
| 3,250 |
February 15, 2009 |
| 2,750 |
April 1, 2009 |
| Formula |
Description (Result) |
| =XIRR(A2:A6,B2:B6) |
The compound annual growth rate (0.373362535 or 37.34%) |
|
Notes
- When you compare the CAGRs of different investments, make sure that each rate is calculated over the same investment period.
- To view the number as a percentage, select the cell and then click Cells on the Format menu. Click the Number tab, and then click Percentage in the Category box.
Function details
XIRR
