Tuesday, 28 August 2012

Calculating Interest Rate

I found it a bit difficult to guess what interest rate I've gotten since I started, but I figured out a way.  The difficulty is that I've been slowly adding to the account.  If it was a lump sum at the start of the period, I'd be able to figure it out easily by dividing the profit/loss by the original amount.  But an original amount that is added to is a bit trickier.

I used an interest calculator here.  I entered the years (1) and the initial balance of my account from back in October when I started trading stocks.  I then took the total of all the contributions I've made and divided the total by 12 to get the monthly contribution.  I know it hasn't been 12 months yet, but figured this would be a good approximation.

Then I adjusted the yield until the total it reported matched the total in my account.  The closest match is a yield of 12.8%.  Not bad for a beginning trader.

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