Rate of Return Question - Posted by Brandt Frederick

Posted by Ben on December 17, 1999 at 08:06:09:

I am no cash flow expert but I think I can handle this. Assume you held this for a year instead of four months you would have made $12,000 (simple interest without compounding etc). 12,000 divided by 11,000 is 1.09. Actually these questions are better suited for the cash flow forum but while we are on the topic, I have always found this annualized ROI to be very misleading. In other words, if I invest a dollar today and get back two dollars tomorrow, my annualized yield is 365% right which sounds great except I have still made a dollar, big deal! How does one calculate a return that is more accurate?

Rate of Return Question - Posted by Brandt Frederick

Posted by Brandt Frederick on December 17, 1999 at 07:11:37:

I have a simple question concerning the calculation of return on invested funds. If I invest $11,000 and four (4) months later I receive my original investment of
$ 11,000. back along with $ 4,000 return on my investment, what is my percentage return on an annual basis?
Thank you all in advance for your continuing help.

96.75 % … - Posted by Brian_CAN

Posted by Brian_CAN on December 17, 1999 at 22:00:54:

This is what I got using N=4, PV=$11,000, PMT=$0, and FV=$-15,000.

Spit this in to your financial calculator and the interest should solve for 96.75%.

Can anyone verify this? Either way 97% and 109% are what they say… “close enough?”

Brian Hildebrandt