Compound Annual Growth Rate

The compound annual growth rate is a business tool used to reflect the geometric
progression ratio for the constant rate of return over a given period. The device can be
considered a growth rate that gets an investor from the initial value of the investment. The
completion of the investment time is under the assumption that the investment has been
compounded over that period. Even though the annual rate of return is the most common tool
used in the determination of mutual funds, the compound annual growth rate is a much better
tool as it takes into consideration the losses that the investment might encounter.
From the assignment, I’ve learned that the compound annual growth rate applies to both
the determination of the profits that a company has made and the losses. The gains will be
indicated with a positive value of the compound annual growth rate, while losses will be
indicated by a negative value of the compound annual growth rate. Also, I’ve learned that the
majority of assets like houses may be appreciated over the years compared to other assets. I will
apply what I have learned in the workplace by offering advice to investors on the best
strategy to follow while investing and making a purchase of assets. For instance, in the real estate
market, I will calculate the compound annual growth rate of the different assets, and that will
assist them in making their investment decisions wisely.
Question 1
The annual compound growth rate of the house
The price of the house when it was sold to Mark and Ann Kington in the year 2000 was
$2,500,000
The price of the house when it was listed for sale in the years 2018 was $8,500,000
Thus, the compound annual growth rate (CAGR) for the house will be computed as follows.

COMPOUND ANNUAL GROWTH RATE 3
Compound Annual Growth Rate = CAGR =
When rounded off the annual compound growth rate for the house that Mark and Kington bought
will be 7%

Question 2

The growth rate of 7% prevailed since the father of Robert Lee known ad Henry first rented the
house in the years 1812. Then the price of the house in the year 1812 will be different from the
current estimated price. The price of the house will be calculated as follows
We will make the assumption that the growth rate of 7% was there throughout the year.
Thus, the price of the house in the year 1812 will be
$2,501 (0.000 – 1.07 (352188 = $7.03

Question 3

If the growth rate of 7% Prevailed since the years 1795, then the price of the house is likely to
change. The price of the house in the year 1795 will be s follows
$2,501 (0.000 – 1.07 (35245 = $2.21

Question 4

Another assumption can be that the growth rate of 7% remains constant till the Stone well
Jackson Memorial Foundation purchased the house in the year 1966. With the assumption in
place the price of the house will change and the computation is as follows
2.501(0.000 – 1.07 (035234 = $ 247,762.39
If the Jackson foundation purchased the house in 1966 and opened the house of the public and
they were not in a position to make the ends meet and decided to sell the house to Mark and Ann
Kington in 2000 for $2.5 million. The annual compound growth rate for Jackson foundation will
be different. The annual compound rate will be computed as follows.

COMPOUND ANNUAL GROWTH RATE 4
House price when sold = $247,762.39
The selling price to Ann Kington and Mark = $2.5 million
Compound annual growth rate = CAGR =
When rounded off to the nearest whole number the compound annual growth rate = 8%

Question 5

The listed price of the house in 2018 was $8.5 million. In the years 2019, the price of the house
was $6.5 million. There was a decrease in the price of the house from the years 2018 to the years

2019. The compound rate for the reduction in the house price will be negative.
      Listed price of the house = $6,500,000
      Price in 2018 = $8,500,000
      Compound annual growth rate (CAGR) = CAGR =
      When rounded off to the nearest whole number the reduction in growth rate will be 24%