Finance Gurus - I need a formula

[GasX]

I have the value you an investment for each year in the future and I want to calculate the annualized rate of return for each year.

i.e

Year 1: $1.00
Year 2: $1.75 (intuitively it is 75% for year 1)
Year 3: $3.06

I have several series to calculate for. Anyone have any ideas?

 

[GasX]

note - I can figure it out by trial and error, but am looking for a direct calculation...

 

[NogginBoink]

You're looking for a formula for compounding interest, right?

You're not making any additional deposits, right? (If you were, then you'd need the future value of an annuity.)

Well then, a google search on "compound interest formula" gets you here.

 

[GasX]

right, but what is the excel formula for r?

 

[cchen]

=principal*((1 + interest/# of times compounded)^(# of times compounded * time))

 

[jw791]

Originally posted by: Mwilding
right, but what is the excel formula for r?

IRR, but you have to make the initial investment a negative number, then put in the cash flows, and account for the recovery.

so cell A1 = -1 (cash outlay)
cell A2 = .75 (interest earned)
cell A3 = 3.06 (2.06 interest + 1 principle recovery)

Cell A4 formula is: =IRR (A1:A3)

Make sense?

PS - need some more puppy pix (sure he's getting huge!)

😎

 

[NogginBoink]

Originally posted by: Mwilding
right, but what is the excel formula for r?

R is your interest rate. In your case it is 75%.

Set up the following cells:

Principal
Interest Rate
N
Number of Years

then the final cell, Amount, is the formula

= Pricipal(1+(Interest Rate/N))^((N)(Number of Years))