Finding out average return on multiple investments

[vamsi.kona]

Hi all,

I would like to know the average returns that one earns over an investment made across different periods.

The situation is explained below.

A makes an investment of 1,00,000 which would fetch him 10,000 after 60 days. However, he would be making the investment in 3 tranches

1st Investment on Day 1 - 20,000

2nd Investment on Day 30 - 70,000

3rd Investment on Day 40 - 10,000


If I simply consider just the absolute return without considering the period and multiple investments it would be 10% (10,000 on a investment of 1,00,000)

However that will not reflect correct return. As can be seen he is not making bulk of the investment at once but rather at different time frames. Since the absolute profit from the investment i.e. 10,000 as well as maturity period i.e. 60 days is not changing the returns should change depending on when he is making the investments.

Please help me out in finding out the average return on the above investment.

 

[vamsi.kona]

Thanks

Thanks for the help. I got it.

WHY do you show 100,000 as 1,00,000?

And with regards to this here in India we still use lakhs rather than millions to denote the amounts, though it is slowly changing.

 

[vamsi.kona]

What did you get?

Sorry for the delayed reply. I was travelling and didn't check the site.

I got slightly different answer since I took 365 days instead.

Here's how I calculated.

((10000/58333)*100)*365/60 = 104.28

If I take 360 then the answer is the same as yours.

Thanks for the help once again.

 

[vamsi.kona]

In furtherance to the above example I came across a peculiar situation. I will try to put it down in detail. Please let me know if the way I have dealt with the calculation is right.


We are into arbitrage deals which requires that we pay 80 or 85% of the total amount to the supplier of the commodity once he deposits the stock in an accredited warehouse. The remaining part would be paid once the stock so deposited is certified by the warehouse as satisfying the quality parameters and the physical copy of the same is sent to us by the supplier. Since we do arbitrage between Futures and Spot markets there is an inherent expiry date for each deal before which all this has to be done.


Coming to the actual deal.

Deal Date	Expiry Date	Partial Payment (13 Jan 2014)	Final Payment (24 Feb 2014)
13 Jan 2014	12 Feb 2014	485610	85696

In the above deal the supplier made a delay in submitting the warehouse certificate though he had deposited the commodity in the warehouse so the final payment got delayed beyond the expiry date. On expiry we liquidated the stocks in warehouse and got our investment along with the returns. However, the final payment was made only on 24 Feb, by which time the amount realised on 12 Feb was utilised for another deal.


Now the issue here is if I calculate the effective investment as per the formula provided in the previous posts it would be as follows


(485610*30) + (85696*-12)/30 = 451332


30 is the number of days from the date of partial payment till expiry i.e. 12 Feb 2014 - 13 Jan 2014
-12 is the days from the date of Final payment till expiry i.e. 24 Feb 2014 to 12 Feb 2014


So am I right in calculating this way???

 

[vamsi.kona]

Any help on this??

Can anyone please help me with the above query. My entire investment decision is depending on the above query. So please help out on this.