How to Calculate a Compound Growth Rate

Video Transcript

"Hi there, I'm Spence Cottam with Account Teams in Salt Lake and this is Jeannine and we help people with their accounting and their taxes and, and helping them get their businesses going; take a load off their backs that they probably don't want to do. I'm going to talk to you today about compound annual growth rate. For the compound annual growth rate is usually associated with stocks. If you buy a stock and pay ten dollars for it and the first year it, it, it's worth twelve dollars; then the next year it's worth fifteen or the next worth were sixteen, the next year it's worth eighteen; the compound annual growth rate is just the average it goes up each year. It may go high one year and low; and not so much another year; it may even drop certain years; but it is just the annual return on that stock over a period of time and then you can use it to compare to other stocks you maybe interested. Compound annual growth rate is more of the theoretical number that's use in the industry. If you were to calculate it, the compound annual growth rate is the ending value of, of an asset divided by the beginning value raise to the power of one divided by the number of years over which that is paid for and subtract one from that."