Excel 2007 : Help with compounding monthly returns for a total return.

**brew17** · 01-22-2012, 05:09 PM

I have a couple of decades worth of monthly returns that I need to compound for total returns after certain periods of time including total (not annual). I have tried using the following formula but it has returned a #VALUE error:

=PRODUCT(1+J4:J300)^(1/297)-1

If I remove the first '1' a number is computed; however this does not give me the appropriate calculation. I am wondering if the issue is being caused by a cell that is text but I have made every attempt to make sure all of my data is formatted as numbers.

Also, I have tried moving around my parentheses, as well as trying 'Control + Shift + Enter.'

**TMS** · 01-22-2012, 08:08 PM

What is the calculation you're trying to achieve? The parameters for PRODUCT are meant to be comma separated numbers, cells or ranges.

So, =PRODUCT(J4:J300) is equivalent to =J4*J5*J6 * ...*J299*J300.

If you Evaluate your formula, you'll see the #VALUE comes immediately from the J4:J300 and, obviously never recovers.

What are you trying to do with the 1+J4:J300 ?

Regards, TMS

**brew17** · 01-22-2012, 09:05 PM

The formula for compounding return is the follow:

Total rate of return=(1+Rate of return for period 1)(1+Rate of return for period 2)(1+rate of return for period...)^(1/# of periods)-1

So I am using PRODUCT in order multiply '1-rate' for each period.

Thanks!
brew17

**TMS** · 01-22-2012, 09:24 PM

I think you might need a helper column with the formula =J4+1 and copy it down to row 300.

Then use the helper column in your PRODUCT function.

Regards, TMS