10 points How would you calculate continuously compounded returns in excel?
I have data on a stock for 20 years and I am just using the adjusted close price. Is the formula simply Ln(adjusted close price2)-LN(adjusted close price1)?
- olliverLv 62 months agoFavorite Answer
i = LN(FV / PV) / n
PV = Present Value
FV = Future Value
i = Discount rate
n = Number of periods
e = Base of the natural logarithm (LN) ≈ 2.71828
- Don GLv 72 months ago
The formula for Continuous Compounding, where A is the sum of principle and interest is: A = Pe^(rt), where e = 2.7183. Assume P = $10,000; R = 15%; T = 5
Solution: A = (10,000) 2.7183^.75 = (10,000) 2.117 = $21,170.
Using a financial calculator, enter rt (.75), then 2ND e^x to get 2.117. Then A = (10,000) 2.117 = 21,170.