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Post# of 79025
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jimapplesmith

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jimapplesmith

Re: wild_card post# 21754

Friday, 02/24/2006 2:04:26 PM

Friday, February 24, 2006 2:04:26 PM

Post# of 79025
No. Use the formula I gave in the previous post.

For your example of +50% and then -25%, the correct average annual return is {(1+0.5)*(1-0.25)}^(1/2) -1 = 0.0607 = 6.07%.

For k years with returns r1, r1, ... rk, the correct average annual return is {(1+r1)*(1+r2)*...*(1+rk)}^(1/k)-1.

The post you replied to gives Excel formula for computing this.

Jim

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