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What Is the Average Annual Growth Rate (AAGR)?
The Average Annual Growth Rate (AAGR) gauges the average percentage change of a metric over a defined period, capturing its compound growth or decline.
Oct 19, 2024 at 11:18 pm
1. What is Average Annual Growth Rate (AAGR)?
The Average Annual Growth Rate (AAGR) is a metric used to calculate the average percentage change of a value over a specified period. It measures the compound annual rate of growth or decline of an investment, asset, or other metric.
2. Formula:
AAGR = (Ending Value/Beginning Value)^(1/Number of Years)-1
3. Calculation Steps:
- Calculate the ratio of the ending value to the beginning value.
- Raise the ratio to the power of 1 divided by the number of years.
- Subtract 1 from the result to obtain the AAGR as a percentage.
4. Interpretation:
A positive AAGR indicates growth, while a negative AAGR indicates decline. The higher the AAGR, the faster the growth or decline.
5. Applications:
AAGR is used in various fields to measure growth and performance, such as:
- Investments (stock market, mutual funds)
- Economic indicators (GDP, consumer spending)
- Business performance (revenue, profits)
- Population growth
- Technological advancements
6. Limitations:
- Assumes a constant growth rate over the entire period.
- Does not account for fluctuations or volatility within the period.
- Can be misleading if the growth rate is not constant.
7. Example:
An investor purchases a stock for $100. After five years, the stock is worth $150. The AAGR can be calculated as:
AAGR = (150/100)^(1/5)-1 = 0.075
or 7.5% per year
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research！
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