An interest rate calculator works backwards.
About this calculator
An interest rate calculator works backwards. Given a starting amount, ending amount, and time period, it determines the annual interest rate, or CAGR, that explains the growth. This is useful when you want to calculate the actual return on an investment.
CAGR (Compound Annual Growth Rate) is useful because it accounts for compounding and expresses growth as an average annual rate.
Common uses
- Calculate the CAGR of a mutual fund investment
- Find the effective annual return on a lump sum investment
- Determine the interest rate on an existing loan
- Compare true returns across different investments
Frequently asked questions
What is CAGR and how is it calculated?
CAGR (Compound Annual Growth Rate) = (Ending Value / Beginning Value)^(1/Years) − 1. It represents the steady annual return rate that would grow the initial investment to the final value. If ₹1 lakh grows to ₹2 lakh in 6 years, CAGR = (2)^(1/6) − 1 ≈ 12.25%.