Second, the calculation method of annualized rate
Enrichment rate). The simple annualized rate is calculated as follows:
Annualized rate = (return on investment/investment period) × 100%
Among them, the rate of return on investment refers to the income during the investment period, and the investment period refers to the length of the investment period, generally in months.
Third, how to correctly calculate the annualized rate
1. Understand the return on investment and investment period.
To correctly calculate the annualized rate, we must first understand the investment yield and investment period. The return on investment refers to the income during the investment period, and the investment period refers to the length of the investment period, generally in months.
2. Calculate the return on investment
The calculation formula of return on investment is: return on investment = (end value of investment-beginning value of investment)/beginning value of investment × 100%.
3. Calculate annualized interest rate
The calculation formula of annualized rate is: annualized rate = (return on investment/investment period) × 100%.
Fourth, the advantage of annualized rate.
1. Compare the investment returns in different time periods under the same reference standard.
The annualized rate can compare the investment returns in different time periods under the same reference standard, so as to better evaluate the risks and returns of investment.
2. Better evaluate the risks and benefits of investment.
The annualized rate can help investors to better evaluate the risks and benefits of investment, so as to better determine the structure and investment strategy of the portfolio.
Five, the shortcomings of the annualized rate
1. Ignore the fluctuation during the investment period.
The annualized rate of return on investment is only calculated according to the time of one year, ignoring the fluctuation during the investment period, so it can not accurately reflect the risks and benefits of investment.
2. Inaccurate short-term investment.
The annualized rate of return on investment is calculated according to the time of one year, so it is not accurate for short-term investment and cannot accurately reflect the risks and benefits of investment.
Abstract of intransitive verbs
To correctly calculate the annualized rate, we must first understand the investment return rate and investment period, and then calculate the annualized rate according to a simple annualized rate calculation formula. Annualized rate has its advantages and disadvantages, so we should pay attention to its limitations when using annualized rate.