ROI Calculation

[Mikeoracle]

How do I calculate the following ROI % ?
Invest $1000 per year for 10 years (total 10k), Take out $20k in year 20.

[upside down]

I don't have the formula for this but I think it's about 7%.
The way I got to that was by splitting up each unit of $1000. Each unit of $1000 returned $2000. The first $1000 took 20 years to do that so that is 5% annually. Do this for each of the 10 units of $1000 and average all 10 to get to 7.05%
If anyone knows how to figure it out though please share

[Sport]

I don't have the formula for this but I think it's about 7%.
The way I got to that was by splitting up each unit of $1000. Each unit of $1000 returned $2000. The first $1000 took 20 years to do that so that is 5% annually. Do this for each of the 10 units of $1000 and average all 10 to get to 7.05%
If anyone knows how to figure it out though please share

I have no clue what the right answer is but its definitly has to be lower than 7%. If he would invest 10k for 10 years a return of 7% would double.
Eta: your method may be correct but your math is off. 1000 turning into 2000 over 20 years is closer to a annual return of 3.5% not 5%.

[upside down]

I have no clue what the right answer is but its definitly has to be lower than 7%. If he would invest 10k for 10 years a return of 7% would double.
Eta: your method may be correct but your math is off. 1000 turning into 2000 over 20 years is closer to a annual return of 3.5% not 5%.

you are correct. I calculated based the percentage based off of the original investment without compounding the money made each year. 

[Sport]

you are correct. I calculated based the percentage based off of the original investment without compounding the money made each year.

My guess is its closer to 5.25%. I would love to hear how to calculate this accurately.

[1234567]

There really isn't an "easy" way to determine interest rates with the given info. We look at this as $1,000 per year accumulated at rate i to time 10, and then that amount accumulated at rate i to time 20.  Using a financial calculator, the rate is 4.8302%.

[Sport]

There really isn't an "easy" way to determine interest rates with the given info. We look at this as $1,000 per year accumulated at rate i to time 10, and then that amount accumulated at rate i to time 20.  Using a financial calculator, the rate is 4.8302%.

What does i to time 10 mean

[1234567]

What does i to time 10 mean

"i" is just a variable representing the interest rate. You can use "x" if that makes more sense to you.  Time 10 is the time when the deposits stop, and whatever is in the account at that point accumulates (with interest) to time 20.

[Sport]

"i" is just a variable representing the interest rate. You can use "x" if that makes more sense to you.  Time 10 is the time when the deposits stop, and whatever is in the account at that point accumulates (with interest) to time 20.

Oh got it. So you werent giving a method to figuring this out just how it needs to be broken down?

[henche]

google

[1234567]

Oh got it. So you werent giving a method to figuring this out just how it needs to be broken down?

I'm afraid so.  It's doable with a financial calculator, but I wouldn't know how do do it without one, short of trial and error.

[1234567]

google

Go right ahead.  Good luck!

[Sport]

google

Cant use that on shabbos and thats when I need to know these calculations the most.
#nishtofshabbos

[Sport]

I'm afraid so.  It's doable with a financial calculator, but I wouldn't know how do do it without one, short of trial and error.

Ok thanks. You seem to be mathematically inclined, are you able to explain why the method used above doesnt work ?

[henche]

Go right ahead.  Good luck!

http://www.pine-grove.com/online-calculators/roi-calculator.htm

[PTU]

Use PV and npv in excel

[1234567]

http://www.pine-grove.com/online-calculators/roi-calculator.htm

I gave him the answer.  He asked how it was done.  If you find a simple explanation using google, I'd love to see it.

[AsherO]

The OP should keep in mind that in the real world he has to look at APY, not interest rate, to compare to whatever annualized ROI figure he gets from his example.

The more often the bank compounds interest, the lower the interest rate will be to achieve the same APY.

[henche]

I gave him the answer.  He asked how it was done.  If you find a simple explanation using google, I'd love to see it.

that's how its done. You gooogle for a calculator and do it

[1234567]

that's how its done. You gooogle for a calculator and do it

Great!  I'm going to try that line if I'm sent out to deal with a curious client.