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Discussion in 'Trading' started by Ricter, Jul 26, 2005.

1. ### Ricter

Ok, if I stand to make \$80k on my \$100k investment this year, is that not simply an 80% increase? So why, when I divide 80%/365 (.00219) and then take that \$100k and "grow" it by .219% per day, do I end up with \$222.3k instead of \$180k for the year?

If I stand to make \$80k on my \$100k this year, what is my actual daily return? More importantly, what is a formula I can use to figure this out, instead of working backwards with trial and error on a spreadsheet?

TIA

2. ### MYDemaray

It's the difference between continuously compounding and not.

Annual Return = 180/100 -1 (you got this 80%)

Now ((1+80%)^(1/365))-1 will give you a return of 0.16% daily. If you compound that daily you will arrive back at the 180 or 80% return.

5. ### gummy

There are similar explanations here.

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