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"L. T. Portella" <
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in message
<My original posting was not clear and I am rephrasing it now.
a b c d e f
Purchase Purchase Today's Market $ Profit % Profit
Date Price Date Value
1/1/02 100.00 9/4/03 150.00 50.00
given the above, what is the formula that I should put in column f to get
the percentage profit expressed as an annual rate. Please note that the %
profit could NOT be 50%
because almost 18 months have elapsed.
Many thanks
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"Alan" <
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<
Hi LT,
Your percentage profit certainly is 50% = (150-100)/100.
However, I suspect that you are asking for your annual return on
investment? This is quite different from the profit percentage.
You annual return will be:
=(((150-100)/100)+1)^(1/(Years))-1
Where Years is the period that you have owned the investment.
In your case it is 18 months = 1.5 years, giving a return on
investment of:
=((1+50%)^(1/1.5))-1
=(150%^0.66666....)-1
~31% per annum.
HTH,
Alan.
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"JohnI in Brisbane" <
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Alan,
Great answer with the formula!
A little more accurate (as it's less than 1.5 years) would be:-
=((1+E3/B3)^(365/(C3-A3)))-1
giving 35.85%
I tested this forwards & it does indeed give 50% over the period.
regards,
JohnI
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Hi John,
That is absolutely correct - basically you can get to whatever degree of
accuracy you want (down to days is probably sufficient for almost anyone)
and then calculate your return.
However, I would caution about giving an answer to four significant figures,
when the market valuation that it is based on might be plus or minus 20%.
If that is the case, showing even 32% (two significant figures), might
*imply* a greater degree of certainty that could be defended upon
inspection. This could be regarded as miseleading (at best) to the reader of
the information coming from the model. If the market value was to plus or
minus 20%, then perhaps 30% or 35% might be a better representation (or 33%
plus or minus 5% - but that often confuses people!)
To clarify for others (not John!) you can test back by taking the answer
(31% in my post above), and raising back to the power of the period in
question (1.5 years in my post):
=((1+31%)^(1.5))-1
=150%-1
=50%
Thanks for provoking some thought!
Alan.
