XIRR or CAGR

[dork32]

Endownment has a single and recurring payments.

For a single payment, you can use a simple CAGR formula.

For recurring payments, you can use an annuity, IRR or XIRR formula.



I think you meant an annuity formula. CAGR is the end result of using the annuity formula.

For a single payment, you can use a simple CAGR formula. Use XIRR also gives the same number but more troublesome calculations are required.

For recurring payments, you can use an annuity, IRR or XIRR formula.

 

[dork32]

in terms of mathematics,
Analytical solution of cagr is possible. its value can be easily calculated by a simple calculator.

There is no analytical solution of xirr, only numerical solution. in other words, there are no formula to it. you have to guess the xirr value till the value is correct. something like the guess and check method that is taught in upper primary school.

 

[Mecisteus]

For a single payment, you can use a simple CAGR formula. Use XIRR also gives the same number but more troublesome calculations are required.

For recurring payments, you can use an annuity, IRR or XIRR formula.

Yup those are what I had said.

 

[dork32]

Yup those are what I had said.

i added this sentence for you:
Use XIRR also gives the same number but more troublesome calculations are required.

 

[dork32]

To compute CAGR return for your endownment plan, you use XIRR to get your CAGR rate with periodic cashflow.

i do not understand this sentence

can you please explain how this is done for a simple example that i quoted (100 per year for 10 years at 10% return)

 

[dork32]

reading thru evino posts, i think this is what he meant:

cagr and xirr means that same thing in English. he is not wrong in this aspect.


However, in terms of maths
cagr and xirr have different formulae. hence they are meant to calculate returns on different situation.

 

[Mecisteus]

However, in terms of maths
cagr and xirr have different formulae. hence they are meant to calculate returns on different situation.

They will give you the same end numbers.

 

[tangent314]

Just use a TVM calculator for anything that doesn't require XIRR.

If it's a single premium, then just set PMT = 0

XIRR is needed if your payment amount is not constant, the period is not constant, or if you have both withdrawals and deposits during the time period (e.g. prucash)

 

[madtari]

Let's talk maths...

How on earth does 2.59 ^1/10 gives you the ratio of 1.1? 2.59 to the power of one equates to 2.59. 2.59/10 = 0.259... and there's no such thing as ratio of 1.1... a ratio is 1:1, 1:2, 4:1 etc... don't keep giving ppl examples and end up confusing ppl. Or maybe I'm stupid and can't understand what ur trying to explain. Sorry for being stupid.

lets talk maths

cagr works this way

lets say you put in an initial investment of 100 and the returns is 10% compounded annually

after one year you have 100 * 1.1 = 110.
after 2 years you have 100 * 1.1 *1.1 = 121
after 10 years you have 100 * 1.1^10 = 259

you final value/ initial value (259/100) = 2.59. it means that your investment increase by 2.59 times over the 10 years. by taking 2.59 ^1/10 gives you the common ratio of 1.1. 1.1 is made up of 1 (principal) and returns 0.1

does that sounds ok?

 

[Mecisteus]

Just use a TVM calculator for anything that doesn't require XIRR.

If it's a single premium, then just set PMT = 0

XIRR is needed if your payment amount is not constant, the period is not constant, or if you have both withdrawals and deposits during the time period (e.g. prucash)

But not everyone has a financial calculator.

But I believe everyone has access to an Excel spreadsheet.

 

[Mecisteus]

Let's talk maths...

How on earth does 2.59 ^1/10 gives you the ratio of 1.1? 2.59 to the power of one equates to 2.59. 2.59/10 = 0.259... and there's no such thing as ratio of 1.1... a ratio is 1:1, 1:2, 4:1 etc... don't keep giving ppl examples and end up confusing ppl. Or maybe I'm stupid and can't understand what ur trying to explain. Sorry for being stupid.

Bro,

2.59^(1/10)

 

[dork32]

Bro,

2.59^(1/10)

thanks for answering for me.

you probably know a bit about cagr, this is why you will not be asking this sort of question.

 

[tangent314]

But not everyone has a financial calculator.

But I believe everyone has access to an Excel spreadsheet.

Plenty of TVM calculators online that can be googled. http://www.zenwealth.com/businessfinanceonline/TVM/TVMCalculator.html is the one I usually use.

Excel can also do TVM. Use RATE, PV, FV, PMT or NPER, depending on which one you want to solve for.

 

[dork32]

Let's talk maths...

and there's no such thing as ratio of 1.1... a ratio is 1:1, 1:2, 4:1 etc... don't keep giving ppl examples and end up confusing ppl. Or maybe I'm stupid and can't understand what ur trying to explain. Sorry for being stupid.

it is clear that you cannot do maths. any one that has done ap and gp in A maths, maths c or h2 maths would know understand the term.

go can google what ap, gp is, and they will explain what common ratio is.

please do not disgrace yourself by tell everyone you cannot even pass simple maths.

 

[dork32]

don't keep giving ppl examples and end up confusing ppl. Or maybe I'm stupid and can't understand what ur trying to explain. Sorry for being stupid.

i am sorry. my posting is for people with very high educational background to understand. you need to pass the very tough and challenging GCE O level to be able to understand it.

 

[madtari]

Whatever that floats your boat dude.

i am sorry. my posting is for people with very high educational background to understand. you need to pass the very tough and challenging GCE O level to be able to understand it.

 

[madtari]

U can't even get your PEDMAS rules correct don't talk to me about higher stuffs ya...

it is clear that you cannot do maths. any one that has done ap and gp in A maths, maths c or h2 maths would know understand the term.

go can google what ap, gp is, and they will explain what common ratio is.

please do not disgrace yourself by tell everyone you cannot even pass simple maths.

 

[dork32]

U can't even get your PEDMAS rules correct don't talk to me about higher stuffs ya...

u cant even read a secondary school text book, talk to me about financial maths

 

[dork32]

Whatever that floats your boat dude.

it confirms what i prostulated. you did not pass o level maths

 

[dork32]

U can't even get your PEDMAS rules correct don't talk to me about higher stuffs ya...

the fact that i can get my numbers out, means i know how to use the calculators and excel.

the fact that you evaluated 2.59^1 speaks a lot about your level of maths.