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Implied Compound Interest?
Hi, I've just checked all the Excel Compound Interest functions but I can’t seem to find the exact one for calculating implied compound interest. I have a starting value of an investment and an ending value, together with the number of years it’s been invested. I’m looking for a function that can tell me the smoothed implied compound growth per year– Sorry if I’ve missed an obvious one but can anyone help? Thanks, Daz -- dazman ------------------------------------------------------------------------ dazman's Profile: http://www.excelforum.com/member.php...o&userid=25903 View this thread: http://www.excelforum.com/showthread...hreadid=497139 |
#2
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Implied Compound Interest?
On Sat, 31 Dec 2005 06:19:09 -0600, dazman
wrote: Hi, I've just checked all the Excel Compound Interest functions but I can’t seem to find the exact one for calculating implied compound interest. I have a starting value of an investment and an ending value, together with the number of years it’s been invested. I’m looking for a function that can tell me the smoothed implied compound growth per year– Sorry if I’ve missed an obvious one but can anyone help? Thanks, Daz I believe the XIRR function will do what you want. The inputs including the starting and ending dates of the period, along with the cash in/out. Be sure to observe the proper sign conventions as outlined in HELP. Also note that the Analysis ToolPak must be installed. HELP has directions for that, too. --ron |
#3
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Implied Compound Interest?
"dazman" wrote:
I've just checked all the Excel Compound Interest functions but I can’t seem to find the exact one for calculating implied compound interest. As near as I can tell, the term "implied compound interest" rate is simply the average interest rate -- the geometric mean rate of return. If you have another meaning in mind, please define the term as you are using it. I have a starting value of an investment and an ending value, together with the number of years it’s been invested. I’m looking for a function that can tell me the smoothed implied compound growth per year Given those parameters, the average growth rate per period can be computed by either of the following: =RATE(n,, -PV, FV) =(FV/PV)^(1/n) - 1 where PV is the starting value, FV is the ending value, and n is the number of compounding periods. |
#4
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Implied Compound Interest?
Thank apolagies for the late reply , athough I couldn't get =RATE(n,, -PV, FV) to work, =(FV/PV)^(1/n) - 1 did the trick nicely. Most useful for inestment spreadsheets. -- dazman ------------------------------------------------------------------------ dazman's Profile: http://www.excelforum.com/member.php...o&userid=25903 View this thread: http://www.excelforum.com/showthread...hreadid=497139 |
#5
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Implied Compound Interest?
"dazman" wrote:
although I couldn't get =RATE(n,,-PV, FV) to work, =(FV/PV)^(1/n) - 1 did the trick nicely. I am glad that one of them worked, but RATE() should have worked, too. Did you notice the double comma ",," (missing optional parameter) and the minus sign "-" before "PV", but not before "FV"? For example: =RATE(12,,-1000,2000) is about 6%, confirming the "rule of 72". We get the same result with =(2000/1000)^(1/12) - 1 Of course, it does not matter which formula you use. If you like the exponential form, to each his own. I just want to be sure that you understand the RATE() syntax. I am sure it will prove equally useful in the future. |
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