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
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.