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Reader Question: How Do I Calculate the Periodic Return on a Negative Number?
By JLP | July 16, 2010
Just received this comment on this post. The question:
Came across this post and had a question….how do you calculate your PRR for the time period when the Annualized PRR is a negative number??
When you enter a negative number into the Excel IRR function you get an error because you can’t raise a negative number to a power (i.e. -8.43% ^ (180/365) = #NUM error).
Thanks for your help…great blog!
Okay, this is easy enough to address. The actual formula for calculating a periodic return is…
In this case, it would like this:
The readers problem was that he tried to perform the calculation using -8.43% rather than its decimal equivalent.
Hope this helps.
Related:
Reader Question Regarding Personal Rate of Return
How to Annualize a Rate of Return
Reader Question: How Do You Calculate Compound Growth (or Interest)?
Topics: Financial Math Basics | No Comments »