Home Theater Forum  ›  Forums  ›  Other Diversions  ›  After Hours Lounge  ›  Rate of return
Forum Nav More Forums | All New Posts | New Thread

Rate of return

#1
Rating: 0
7/25/05 at 10:38am
  • Joined: May 1999
  • Post Count: 2,815
Let's say you invest $100 per month for one year. At the end of the year, you have $1,500 ($1,200 invested and $300 gains). How would you calculate the rate of return? (On the surface it appears to be 25% but in reality it would be higher because the $1,200 wasn't fully invested for the whole year.)

Thanks
Export to Wiki
#2
Rating: 0
7/25/05 at 11:11am
  • Joined: April 2000
  • Post Count: 5,211
How much are you gaining per month?

high resolution ipod featuring dlp hd programming is the best, almost as good as playstation 2 with wega windows media on a super cd! ps2 and tivo do dolby tv with broadband hdtv!

Export to Wiki
#3
Rating: 0
7/25/05 at 11:35am
  • Joined: May 1999
  • Post Count: 2,815
Quote:
How much are you gaining per month?

Variable rates...it could be nothing some months or 40% in other months.

I guess I'm wondering how mutual funds do it, where there are inflows and outflows each month.
Export to Wiki
#4
Rating: 0
7/25/05 at 1:21pm
  • Joined: February 2001
  • Post Count: 556
With mutual funds, you buy shares. The annualized percentage change in the share price between any 2 dates is what they quote as the fund's return. It would be the same return you would calculate if you didn't have money going in and out.

In your example, let's say the share price is $10 on day one. Your $100 buys you 10 shares. Next month, the share price is $20 so you get 5 shares. At that point, you have 15 shares worth $20 each. At the end of 12 months, you've got x shares at a final price of y. In your example, x times y equals $1500. The mutual fund company would quote their own performance as 100 times (y-10)/10. Your own personal return is calculated by solving for i such that 100*[(1+i)+(1+i)^(11/12)+(1+i)^(10/12)+ ... +(1+i)^(1/12)]=1500 which I think works out to 47.6%.

~Eschew obfuscation~

Export to Wiki
Forum Nav More Forums | All New Posts | New Thread