Compound interest calculators

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peteyperson
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Posts: 525
Joined: Tue Nov 26, 2002 6:46 am

Compound interest calculators

Post by peteyperson »

When looking at 5 year performance data, it is often nice to take a 56.25% return figure and calculate the annualized return. Additionally it would be nice to be able to take the 5 year figure and include the effect of the yearly mgmt fee compounded during that time to deduce the real return after fees.

So far my search has found an online calculator that takes the starting and ending value and number of years and spits out a number. Is there anything better out there that includes the kind of variables investors are interested in? Only Vanguard seems brave enough to show the annualised return after mgmt fees, the rest of the industry hides behind the gross figure not wanting investors to realise how little they're getting after their high fees are taken into account.

My calculator is here:
http://billmaury.com/scripts/compound.pl

Thanks,
Petey
therealchips
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Posts: 174
Joined: Sat Jan 04, 2003 4:00 am
Location: Henderson, Nevada, USA

What is the rate of return on an investment?

Post by therealchips »

http://www.fincalc.com can help. It offers calculators to address these ten questions or issues and many others:
Becoming a millionaire
Income generated by a savings plan.
How long will it take to double my money?
How long until my savings reach my goal?
Save now vs. save later calculator
How much should I save to reach my goal?
What will my current savings grow to?
What is the rate of return on an investment?
How do taxes and inflation impact my return?
What is my effective annual yield?

Editted to add: These online calculators are free. You don't even have to register to use them.
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
raddr
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Post by raddr »

Petey,

You probably know this but you can calculate the CAGR yourself with this formula:

(final value / original value) ^ (1/years) - 1

For your example it would be:

(1.56 / 1) ^ (1/5) - 1 = 0.0930 or 9.3% per annum. I do this all the time in MS Excel.
therealchips
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Posts: 174
Joined: Sat Jan 04, 2003 4:00 am
Location: Henderson, Nevada, USA

Post by therealchips »

Petey,

Here is a way to invoke any of Excel's built in functions. While pointing your cursor to a blank cell, select Insert from the menu bar. Then choose Function from the drop down list. Select the category Financial to see the related Excel functions. An example is FV(rate,nper,pmt,pv,type) which returns the future value of an investment based on periodic, constant payments and a constant interest rate. If you mouse on FV and then on Help on this Function, you get a more complete description, starting with this:
Returns the future value of an investment based on periodic, constant payments and a constant interest rate.

Syntax

FV(rate,nper,pmt,pv,type)

For a more complete description of the arguments in FV and for more information on annuity functions, see PV.

Rate is the interest rate per period.

Nper is the total number of payment periods in an annuity.

Pmt is the payment made each period; it cannot change over the life of the annuity. Typically, pmt contains principal and interest but no other fees or taxes. If pmt is omitted, you must include the pv argument.

Pv is the present value, or the lump-sum amount that a series of future payments is worth right now. If pv is omitted, it is assumed to be 0 (zero), and you must include the pmt argument.

Type is the number 0 or 1 and indicates when payments are due. If type is omitted, it is assumed to be 0. (Tells whether payments are due at the start or at the end of the period.)
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
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