OT: Rate of Return Calculations, Big brain Fart |
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OT: Rate of Return Calculations, Big brain Fart |
Qarl |
May 12 2005, 06:52 PM
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#1
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Shriveled member Group: Benefactors Posts: 5,233 Joined: 8-February 03 From: Florida Member No.: 271 Region Association: None |
Let's say I invested $1000 in a mutual fund on November 1, 2002
At the end of April of 2005, it is worth $1450. My gain is $450 or 45% since I purchased it. But how do I calculate how much average annual return it has been for the 30 month period. Or in other words, it's equivalent to an investment making X% a year? What's the formula? Thanks.... |
michel richard |
May 12 2005, 08:00 PM
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#2
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Senior Member Group: Members Posts: 1,291 Joined: 22-July 03 From: Longueuil, Québec Member No.: 936 |
To convert a yearly compounded figure into a monthly one:
((1 + 16.02 %) ^ ( 1 / 12 ) -1 ) * 12 In this case, there is no absolute reason for calculating on a daily, monthly, or yearly compounded basis, because there is only one cashflow at the end. The reason for paying attention to compounding frequency is simply to ensure that you are looking at comparable figures if you compare to returns on another investment. Michel |
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