Compound annual growth rate

To understand CAGR, you must understand the concept of compounding.

If you invest N100m (one hundred million Naira) at 10% per annum, you would expect to collect N10m in interest at the end of the year (10% of N100m). At the end of the second year, you would collect another N10m in interest, and so on. If, however, you decided not to withdraw the interest of N10m, but rather to compound it, you would have N100m + N10m = N110m to invest at 10% at the beginning of the second year. So, at the end of the second year, you would receive N11m in interest (10% of N110m). You would therefore have N110m + N11m = N121m to invest at 10% at the beginning of the third year, and so on.

The Naira is the currency of Nigeria - you ...

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