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

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    Help with compounding monthly returns for a total return.

    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.'

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    Re: Help with compounding monthly returns for a total return.

    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
    Trevor Shuttleworth - Excel Aid

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    Re: Help with compounding monthly returns for a total return.

    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

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    Forum Guru TMS's Avatar
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    Re: Help with compounding monthly returns for a total return.

    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

  5. #5
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    Re: Help with compounding monthly returns for a total return.

    That sounds like it'll work. I appreciate your help. I'll make sure it works as soon as I get a chance.

    Thanks!
    Brew17

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