Continuous compounding

[finfan]

Over a period of one year, an investor�s portfolio has declined in value from 127,350 to 108,427. What is the continuously compounded rate of return?

A) -14.86%.
B) -16.09%.
C) -11.72%.
D) -13.84%.

 

[supersharpshooter]

e^r = 108427/127350

r = ln (108427/127350)

B) -16.09%.

 

[SkipE99]

i thought it was Ln of 1+hpr? d?



Edited 1 time(s). Last edit at Thursday, June 5, 2008 at 08:01PM by SkipE99.

 

[daj224]

supersharpshooter Wrote:
-------------------------------------------------------
> e^r = 108427/127350
>
> r = ln (108427/127350)
>
> B) -16.09%.




nice

 

[shreya4848]

D

ln ( 1 + HPR)

 

[SkipE99]

shreya4848 Wrote:
-------------------------------------------------------
> D
>
> ln ( 1 + HPR)


nice

 

[finfan]

Thanks all!

Can anybody explain how to put these on the TI calculator??

 

[tvPM]

it works as 1+HPR ln
HPR=(108427-127350)/127350
=-.1486+1=.8514
ln 8514 = -.1609

 

[SkipE99]

well hey now which one is right?

 

[SkipE99]

the negative! awesome..im fired

 

[finfan]

B is correct...

But I don't understand the "ln" part of it..

 

[mcf]

A sort of cheat to this, so you don't remember another formula... is just use the TVM features on your calc... set a number of periods sufficiently large... 1000 usually does it.. then solve for the rate and multiply that by the number of periods.

 

[daj224]

spo it seems der are 2 ways

LN (end val/beg vlaue)

or LN ( 1 + HPR)

HPR is easy to get, so i might do it this second way

and brand this formmula in my head

CC = LN (1 + HPR)

 

[finfan]

mcf Wrote:
-------------------------------------------------------
> A sort of cheat to this, so you don't remember
> another formula... is just use the TVM features on
> your calc... set a number of periods sufficiently
> large... 1000 usually does it.. then solve for the
> rate and multiply that by the number of periods.


Mannnnn, this trick works..... thanks a bunch!!!!!!!!!

Thanks everyone!!

 

[heha168]

mcf Wrote:
-------------------------------------------------------
> A sort of cheat to this, so you don't remember
> another formula... is just use the TVM features on
> your calc... set a number of periods sufficiently
> large... 1000 usually does it.. then solve for the
> rate and multiply that by the number of periods.


nice
highly recommended

 

[mcf]

It's all about the shortcuts at this point...

(can you believe I started quant without a calculator and did this crap by hand?!? -- I was friggin' nuts!)

 

[finfan]

mcf Wrote:
-------------------------------------------------------
> It's all about the shortcuts at this point...
>
> (can you believe I started quant without a
> calculator and did this crap by hand?!? -- I was
> friggin' nuts!)


no wonder, you are soooo clear in your concepts.... hats off!!

BA Plus 2 makes life easier...

 

[SkipE99]

finfan Wrote:
-------------------------------------------------------
> mcf Wrote:
> --------------------------------------------------
> -----
> > A sort of cheat to this, so you don't remember
> > another formula... is just use the TVM features
> on
> > your calc... set a number of periods
> sufficiently
> > large... 1000 usually does it.. then solve for
> the
> > rate and multiply that by the number of
> periods.
>
>
> Mannnnn, this trick works..... thanks a
> bunch!!!!!!!!!
>
> Thanks everyone!!


yeah thats pretty nifty...excellent way to check your work and yes....its very nice! ha ha

 

[madanalyst]

lets do a question on question:

if none of the $ amounts are given.... what is the HPR if cont comp return is -16.08% ?

 

[mcf]

17.44?