Quote:
Originally Posted by jghorton
What is the point or relevance of 'annualizing' the return on a single transaction? - If one earned 25-percent on their investments every 9-days, one would have a significantly multiplied return. One the other hand, if one annualized a single, 9-day 25-percent return over forty, 9-day periods, one's 'annualized return' would be only a fractional percentage of that.
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Exactly, which is why I asked the OP to define what he or she was after.
ohio_peasant also got it correct if the OP meant for a 24.9% 9-day gain to be compounded over a one-year period. I did the math two ways via the following equation and a spreadsheet. The annualized gain is over 829,000%.
(1 + 0.249)^(1/9/365.25) gives 8294. Subtract 1 and multiply by 100 to get %.
The spreadsheet modelling means you increase the base by 24.9% every 9 days. Same answer.
But, I suspect that someone who thinks that a 24.9% gain every 9 days can be realized for an entire year probably didn't understand what "annualizing" the return meant.
And, of course, if someone sells after 9 days to "earn" that 24.9% return, then that trade is done and 24.9% spread over the year is a very small number.
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