Mastering CAGR and Holding Yield: Step-by-Step Excel Guide with RATE, XIRR Functions and ChatGPT Prompt

 

Understanding CAGR and Holding Yield in Finance

Introduction

The Compound Annual Growth Rate (CAGR) and Holding Period Yield (HPY) are crucial metrics used to evaluate investment performance. This blog explores their importance using a practical example of an investment in a fund, examining both the CAGR and HPY to highlight their differences and significance in financial analysis.

Investment Example

An investment of $117,976 was made on October 18, 2016, and grew to $276,318.30 by February 21, 2025. The reinvestment of unit distributions is already included in the final value.

Step-by-Step Calculations Using Excel Functions

1. Calculate the Holding Period in Days

• Start Date: October 18, 2016
• End Date: February 21, 2025
• Excel Formula: =DATEDIF("2016-10-18", "2025-02-21", "D")
• Total Days: 3,047 days

2. Calculate the Holding Period Yield (HPY) The formula is: =((FV - PV) / PV) * 100

• Final Value (FV): $276,318.30
• Initial Investment (PV): $117,976
• Excel Formula: =((276318.30 - 117976) / 117976) * 100
• Result: 134.19%

3. Calculate the Number of Years (n) Convert the holding period in days into years:

• Excel Formula: =3047 / 365
• Result: 8.34 years

4. Calculate the Compound Annual Growth Rate (CAGR) Using the RATE function in Excel:

• Syntax: =RATE(n, 0, -PV, FV)
• Formula: =RATE(8.34, 0, -117976, 276318.30)
• Result: 10.25%
• Note: The RATE function assumes a year consists of exactly 365 days.

5. Calculate CAGR Using the XIRR Function

• Create a table with dates and cash flows:
  • Row 1: 2016-10-18, -117976 (initial investment, negative because it's an outflow)
  • Row 2: 2025-02-21, 276318.30 (final value, positive because it's an inflow)
• Excel Formula: =XIRR(B2:B3, A2:A3)
• Result: 10.73%
• Explanation: The XIRR function considers the actual number of days in each year (365 or 366 for leap years), providing a slightly higher return than the RATE function.

Comparison: CAGR vs. Holding Period Yield

• CAGR (10.25% using RATE, 10.73% using XIRR) represents the annualized rate of return, smoothing out fluctuations and providing a clear picture of consistent growth.
• HPY (134.19%) reflects the total percentage increase over the entire holding period.

The difference between the RATE and XIRR results is due to the treatment of calendar days. RATE uses a simplified 365-day year, while XIRR accounts for leap years, making it more accurate for long-term investments.

Importance of CAGR in Finance

CAGR simplifies the comparison of investment performance over different periods. Key applications include:

• Evaluating Investment Performance: Provides a clear view of growth trends.
• Comparing Different Investments: Standardizes returns for fair comparisons.
• Forecasting Future Returns: Helps estimate potential future growth.

ChatGPT Prompt

As a certified financial planner, Calculate and compare the Compound Annual Growth Rate (CAGR) and Holding Yield for an investment initially valued at $117,976 on October 18, 2016, which grew to $276,318.30 by February 21, 2025 (including reinvested unit distributions). Provide the final comparative values for CAGR and Holding Yield rounded to two decimal places, formatted clearly in a concise table. Additionally, briefly interpret the meaning and practical implications of these two metrics for evaluating investment performance. This calculation serves as an alternative verification method to standard financial calculators and Excel.

Conclusion

In conclusion, both CAGR and HPY are essential for assessing investment performance. However, CAGR's annualized perspective makes it particularly valuable for long-term financial planning and comparative analysis, and using Excel functions like RATE and XIRR ensures accurate and efficient calculations.

Why Your Loan’s Interest Rate Isn’t What It Seems: Flat Rate vs. IRR Demystified with ChatGPT Prompt

How Lenders Trick You with Low Interest Rates – The Truth About EIR and Excel Calculations

When borrowing money, many consumers focus on the advertised interest rate, often overlooking the Effective Interest Rate (EIR), which more accurately reflects the true cost of borrowing. Lenders may use marketing tactics to make loans appear more attractive by quoting nominal or flat rates instead of the actual EIR. This allows them to present lower interest rates, making the loan seem more affordable to potential borrowers. By doing so, lenders can attract more customers while obscuring the true cost of borrowing.

Borrowers who do not carefully examine the EIR might unknowingly commit to a loan with a significantly higher real interest cost than expected. For example, a lender might advertise a low flat rate of 2% per annum, which appears cheaper than a competitor’s 4% EIR, but in reality, the effective cost of borrowing could be significantly higher due to compounding interest and additional fees. Similarly, some lenders emphasize low monthly installments without highlighting the longer loan tenure, which results in higher overall interest payments.

This blog investigates the impact of EIR through four different loan scenarios.

Loan Examples, Cash Flows, and Calculation of Flat Rate vs. EIR

Example 1: Borrowing $10,000 for 1 year, Monthly Repayment of $854

• Cash Flow: -$10,000 (initial) | +$854 (monthly for 12 months)
• Total Repayment = $854 * 12 = $10,248
• Interest Paid = $10,248 - $10,000 = $248
• Flat Rate Interest = ($248 / $10,000) * 100% = 2.48%
• Effective Interest Rate (EIR) computed using IRR formula: 4.64%

Example 2: Borrowing $10,000 for 3 months, Monthly Repayment of $3,374

• Cash Flow: -$10,000 (initial) | +$3,374 (monthly for 3 months)
• Total Repayment = $3,374 * 3 = $10,122
• Interest Paid = $10,122 - $10,000 = $122
• Flat Rate Interest = ($122 / $10,000) * 100% = 1.22%
• Effective Interest Rate (EIR) computed using IRR formula: 7.55%

Example 3: Borrowing $10,000 for 3 years, Monthly Repayment of $302

• Cash Flow: -$10,000 (initial) | +$302 (monthly for 36 months)
• Total Repayment = $302 * 36 = $10,872
• Interest Paid = $10,872 - $10,000 = $872
• Flat Rate Interest = ($872 / $10,000) * 100% = 8.72%
• Effective Interest Rate (EIR) computed using IRR formula: 5.65%

Example 4: Borrowing $10,000 for 1 year, Monthly Repayment of $881 with One-Time Processing Fee (Included in Initial Loan Amount for Accuracy)

• Cash Flow: -$10,200 (initial, including $200 processing fee) | +$881 (monthly for 12 months)
• Total Repayment = $881 * 12 = $10,572
• Interest Paid = $10,572 - $10,000 = $572
• If a one-time processing fee of $200 is included, total cost = $572 + $200 = $772
• Flat Rate Interest = ($772 / $10,000) * 100% = 7.72%
• Effective Interest Rate (EIR) computed using IRR formula: 6.87% (Processing fee included in initial loan amount for accurate calculation)

Key Insights

1. EIR is Always Higher than the Advertised Flat Rate: Lenders often quote flat interest rates, but EIR accounts for the time value of money and is always higher than the stated rate. Borrowers should always request the EIR to understand the actual cost.

2. Shorter Loan Terms Can Significantly Increase EIR: Although the total interest amount paid might seem low in short-term loans, the high monthly repayments can lead to an EIR much higher than the stated flat rate.

3. Fees and Charges Increase the Real Cost of Borrowing: Example 4 highlights how a processing fee significantly inflates the true cost of borrowing, pushing the EIR higher than expected.

How to Compute EIR and Monthly Interest Rate Using Excel for Each Example

When deciding between the IRR and RATE functions, borrowers should consider their specific loan conditions:

• Choose IRR if the loan includes irregular payments or additional fees, as it dynamically accounts for the time value of money.
• Choose RATE if the loan follows a fixed payment structure without additional charges, making it a simpler option for standard loans.

To calculate the Effective Interest Rate (EIR) in Excel, follow these steps for each loan example:

Choosing Between IRR and RATE Function

• IRR Function: Best used when the cash flows include irregular payments or additional fees, as it accounts for the time value of money dynamically.
• RATE Function: Ideal for fixed-payment loans with no additional fees, as it directly calculates the periodic interest rate based on constant cash flows.

Example 1: Borrowing $10,000 for 1 year, Monthly Repayment of $854

1. Enter the following values into Excel:

A1: -10000
A2: 854
A3: 854
...
A13: 854

2. Use the formula =IRR(A1:A13) to get the monthly IRR.
3. Convert it to an annual rate using (1+IRR result)^12 - 1.

Example 2: Borrowing $10,000 for 3 months, Monthly Repayment of $3,374

1. Enter the values:

A1: -10000
A2: 3374
A3: 3374
A4: 3374

2. Use =IRR(A1:A4) to get the monthly IRR.
3. Convert to an annual rate with (1+IRR result)^12 - 1.

Example 3: Borrowing $10,000 for 3 years, Monthly Repayment of $302

1. Enter the values:

A1: -10000
A2: 302
A3: 302
...
A37: 302

2. Use =IRR(A1:A37) to get the monthly IRR.
3. Convert to an annual rate with (1+IRR result)^12 - 1.

Example 4: Borrowing $10,000 for 1 year, Monthly Repayment of $881 with One-Time Processing Fee

1. Enter the values (including processing fee in initial loan disbursement):

A1: -10200
A2: 881
A3: 881
...
A13: 881

2. Use =IRR(A1:A13) to get the monthly IRR.
3. Convert to an annual rate with (1+IRR result)^12 - 1.

How to Compute Monthly Interest Rate Using Excel RATE Function

In addition to the IRR function, the Excel RATE function can also be used to compute the monthly interest rate and derive the Effective Interest Rate (EIR).

Example 1: Borrowing $10,000 for 1 year, Monthly Repayment of $854

1. Use the formula: =RATE(12, -854, 10000)
2. Convert to an annual rate: (1+RATE result)^12 - 1

Example 2: Borrowing $10,000 for 3 months, Monthly Repayment of $3,374

1. Use the formula: =RATE(3, -3374, 10000)
2. Convert to an annual rate: (1+RATE result)^12 - 1

Example 3: Borrowing $10,000 for 3 years, Monthly Repayment of $302

1. Use the formula: =RATE(36, -302, 10000)
2. Convert to an annual rate: (1+RATE result)^12 - 1

Example 4: Borrowing $10,000 for 1 year, Monthly Repayment of $881 with One-Time Processing Fee

1. Use the formula: =RATE(12, -881, 10200)
2. Convert to an annual rate: (1+RATE result)^12 - 1

Final Thoughts

To calculate the Effective Interest Rate (EIR) in Excel, follow these steps:

1. List the cash flows: Enter the initial loan disbursement as a negative value (e.g., -10,000) in one cell and the periodic repayments as positive values in the subsequent cells.
2. Use the IRR function: Select an empty cell and type =IRR(range_of_cash_flows), replacing range_of_cash_flows with the actual range of the cash flows.
3. Convert to an annual rate: Since IRR returns a monthly rate in this context, convert it to an annual rate using the formula: (1 + IRR result)^12 - 1.

Example:

A1: -10000
A2: 854
A3: 854
...
A13: 854

Formula: `=IRR(A1:A13)` then `(1+IRR result)^12 - 1`

ChatGPT Prompt

As a financial expert, calculate and compare the Flat Rate Interest and Effective Interest Rate (EIR) for a loan of $10,000 borrowed for a 1-year term, with monthly repayments of $854. Provide the summarized final values clearly in a concise table, rounding each value to 2 decimal places. Additionally, briefly interpret these two interest rate types and explain the practical differences between them to offer internal verification and insightful understanding of loan cost implications.

For the following examples, you may replace the bolded and underlined font by pasting it with another examples.

Conclusion

Understanding the true cost of borrowing goes beyond just looking at the nominal interest rate. The EIR provides a clearer picture by considering loan tenure, payment structure, and additional fees. Before signing a loan agreement, always ask for the EIR and calculate the actual repayment amount to avoid falling into marketing traps.

By making informed financial decisions, borrowers can avoid costly mistakes and select loan options that align with their financial health and objectives.

Key Takeaways for Borrowers

Understanding the difference between reducing balance and flat interest rates is crucial. A flat interest rate charges interest on the original loan amount throughout the loan term, making it appear lower but often resulting in a higher effective cost. A reducing balance interest rate, however, applies interest on the remaining principal, leading to lower interest payments over time. Always clarify which method a lender is using before committing to a loan.

1. Always Compare EIR, Not Just Advertised Rates – Ensure you understand the actual cost of borrowing.
2. Consider the Impact of Fees – Processing fees and other charges can significantly increase the cost of borrowing.
3. Loan Term Matters – Shorter loan durations often lead to higher EIRs.
4. Use Financial Tools – Excel's IRR or RATE functions can help you assess loan costs accurately.
5. Negotiate Terms – If possible, negotiate better terms, especially for fees and interest structures.

Unlock Financial Freedom: How Personal Financial Health Empowers Your Life

 

Ever wondered why some people navigate life’s uncertainties—job loss, medical emergencies, or inflation—with confidence, while others feel trapped? The answer lies in one often-overlooked superpower: personal financial health. Here’s why it’s the cornerstone of a fulfilling, stress-free life (and how to start building yours today).

1. Freedom & Choices

Financial health isn’t just about numbers—it’s about empowerment. When your finances are in order, you have the freedom to say “yes” to opportunities and “no” to situations that don’t serve you.

• A well-funded emergency fund allows you to leave a toxic job without fear.
• Financial independence opens doors for travel, further education, or entrepreneurial ventures.
• Debt freedom means keeping more of your paycheck for things that matter most.

Example: Imagine having six months’ worth of expenses saved. If you lose your job, you can take time to find the right opportunity instead of scrambling for the first available paycheck.

2. Stress Reduction & Mental Wellbeing

Money is a major source of stress. The American Psychological Association reports that 72% of adults cite finances as a top stressor. Chronic financial stress can harm relationships, sleep, and even physical health.

• A “scarcity mindset” (living paycheck to paycheck) fuels anxiety and limits future thinking.
• An “abundance mindset” (having financial security) fosters confidence and peace of mind.
• Financial stability allows you to focus on personal growth, family, and overall well-being.

3. Compound Wealth & Future-Proofing

Building wealth isn’t about luck; it’s about consistent, small actions that compound over time.

• Investing early—even small amounts—creates exponential growth.
• Eliminating high-interest debt saves thousands in wasted payments.
• Smart money habits today ensure a secure retirement and financial independence.

Time value of money: A 25-year-old investing $420/month at a 7% return can become a millionaire by age 65 (Excel: PMT(7%,65-25,0,1000000)/12). Waiting just ten years to start cuts that final number in half. Procrastination has a hefty price tag!

4. Resilience in Crisis

Life is unpredictable. Your financial health acts as a shock absorber when unexpected challenges arise.

• A well-stocked emergency fund prevents financial disaster from medical emergencies or job loss.
• Diversified income sources offer stability during economic downturns.
• Smart insurance choices protect against catastrophic financial loss.

Example: When Sarah lost her job, her 6-month emergency fund turned panic into a strategic career pivot instead of a desperate scramble.

5. Legacy & Impact

Beyond personal security, financial health enables you to make a difference in the lives of others.

• Provide for your family without burdening them.
• Support charities, scholarships, or community projects.
• Leave a lasting inheritance that ensures generational wealth.

Call to Action

Your financial health is your greatest asset—so start strengthening it today.

• Audit your financial health: Calculate your net worth and track your spending for the next seven days.
• Take action: Open a high-yield savings account, start an investment plan, or eliminate one financial drain from your budget.
• Check out our checklist: “Mastering Personal Finance: Using Excel to Determine Asset, Liability, and Net Worth” for a step-by-step action plan.

Money is a tool, not a goal. Treat your financial health like self-care—and watch how it transforms your life.

Conclusion

Understanding the Time Value of Money (TVM) is crucial for making sound financial decisions. Every dollar you invest or save today has the potential to grow exponentially over time, reducing financial strain in the future. Proper money management ensures that you can take advantage of compound interest, avoid unnecessary debt, and maintain financial stability. By prioritizing financial health and making informed choices, you can prevent avoidable troubles, secure your future, and truly enjoy financial freedom.

Achieve Financial Clarity: Using Excel to Calculate Net Worth and Key Financial Ratios

Introduction: In personal finance, understanding your asset, liability, and net worth is crucial for making informed financial decisions. Excel is a powerful tool that can help streamline this process. This guide will walk you through setting up an Excel sheet to determine your financial standing, including net investible assets, debt servicing ratio, savings ratio, and liquidity/expense ratio.

Step 1: Setting Up the Asset and Liability Worksheet

1. Open a new Excel spreadsheet and create the following column headers:
   • A1: Asset Category
   • B1: Asset Value
   • C1: Liability Category
   • D1: Liability Value
2. List all your assets (cash, investments, real estate, etc.) under column A and their corresponding values under column B.
3. List all your liabilities (loans, credit card debt, mortgages, etc.) under column C and their corresponding values under column D.

Step 2: Calculating Net Worth

1. In a new cell, use the formula:

   =SUM(B2:Bn)-SUM(D2:Dn)
   

   • This formula subtracts total liabilities from total assets to determine net worth.

Step 3: Determining Net Investible Assets Net investible assets refer to the liquid and semi-liquid assets that can be used for investment purposes.

1. Identify and sum up investible assets such as savings, stocks, bonds, and mutual funds:

   =SUM(B2, B4, B5)  
   

   (where B2, B4, and B5 represent rows with investible assets.)
2. Deduct any short-term liabilities:

   =SUM(B2, B4, B5) - SUM(D2, D3)
   

Step 4: Computing the Debt Servicing Ratio (DSR) Debt servicing ratio helps in understanding your financial obligations relative to income.

1. Input total monthly debt payments in a cell (e.g., E2) and total monthly income in another (E3).
2. Use the formula:

   =E2/E3
   

   • A lower ratio indicates better financial health.

Step 5: Calculating the Savings Ratio The savings ratio determines how much of your income is being saved.

1. Input total monthly savings (F2) and total monthly income (F3).
2. Use the formula:

   =F2/F3
   

   • A higher savings ratio is preferable.

Step 6: Calculating the Liquidity/Expense Ratio The liquidity/expense ratio measures the ability to cover expenses using liquid assets.

1. Input total liquid assets (G2) and total monthly expenses (G3).
2. Use the formula:

   =G2/G3
   

   • A ratio above 3 indicates strong financial liquidity.

Step 7: Analyzing and Interpreting Results

• If net worth is positive, financial stability is high.
• A DSR below 30% is considered healthy.
• A savings ratio above 20% is ideal for long-term financial security.
• A liquidity/expense ratio above 3 suggests strong financial liquidity.

Complicated Net Worth Example and Analysis: Example Scenario: John has the following financial details:

• Assets:

  • Cash: $10,000
  • Stocks: $50,000
  • Real Estate: $300,000
  • Retirement Funds: $100,000
  • Car: $20,000

• Liabilities:

  • Mortgage: $200,000
  • Car Loan: $10,000
  • Credit Card Debt: $5,000
  • Student Loan: $25,000

Using the formula:

=SUM(10000, 50000, 300000, 100000, 20000) - SUM(200000, 10000, 5000, 25000)

John’s net worth is:

= $480,000 - $240,000 = $240,000

Debt Servicing Ratio (DSR) Analysis: John’s monthly income is $8,000, and his monthly debt payments are $2,400.

= 2400 / 8000

DSR = 30%, which is at the upper limit of a healthy financial standing.

Savings Ratio Analysis: John saves $2,000 per month.

= 2000 / 8000

Savings Ratio = 25%, indicating a good saving habit.

Liquidity/Expense Ratio Analysis: John’s total liquid assets (cash + stocks) are $60,000, and his monthly expenses are $6,000.

= 60000 / 6000

Liquidity/Expense Ratio = 10, which indicates very strong liquidity.

Conclusion: By using Excel to track assets, liabilities, and financial ratios such as net worth, debt servicing ratio, savings ratio, and liquidity/expense ratio, individuals can gain deeper insights into their financial standing. Maintaining a positive net worth, managing debt effectively, saving consistently, and ensuring liquidity for emergencies are essential steps toward financial stability and growth. Mastering these formulas will empower individuals to make informed financial decisions and improve overall financial health.

Understanding CAGR, NPV, and IRR in Excel: A Practical Guide

When analyzing investments, understanding key financial metrics is crucial. This guide explains Compound Annual Growth Rate (CAGR), Net Present Value (NPV), and Internal Rate of Return (IRR)—three essential financial tools. Using Excel, we'll walk through the formulas step by step, compare standard functions with their more precise alternatives (XNPV and XIRR), and highlight key cautions when using NPV.

1. Understanding CAGR (Compound Annual Growth Rate)

CAGR measures the average annual growth rate of an investment over a period of time, smoothing out fluctuations. It helps investors compare different investments with varying growth patterns.

Formula for CAGR

$$CAGR = \left( \frac{FV}{PV} \right)^{\frac{1}{n}} - 1$$

Where:

• FV = Future Value
• PV = Present Value (initial investment)
• n = Number of years

Excel Formula for CAGR

You can use Excel to calculate CAGR using the POWER function:

=POWER(FV/PV, 1/n) - 1

Or, alternatively:

=(FV/PV)^(1/n) - 1

Example Calculation in Excel

1. Assume an investment grows from $1,000 to $3,500 in 5 years.
2. Use the formula:

=(3500/1000)^(1/5) - 1

This returns 0.284, meaning the investment grows at 28.4% per year on average.

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2. NPV vs. XNPV: Key Differences and How to Use Them in Excel

Net Present Value (NPV) and Its Importance

NPV helps determine the current value of future cash flows, considering a discount rate. It tells whether an investment is profitable based on projected returns.

Standard NPV Formula in Excel

$$NPV = \sum \frac{C_t}{(1 + r)^t}$$

Where:

• C_t = Cash flow at time t
• r = Discount rate
• t = Time period

How to Calculate NPV in Excel

Example Scenario

Assume an investment with the following cash flows:

Year	Cash Flow ($)
0	-10,000
1	3,000
2	4,000
3	5,000

With a 10% discount rate, the Excel formula for NPV is:

=NPV(10%, B2:B4) + B1

📌 Caution: Excel’s NPV function assumes cash flows occur at the end of each period. If cash flows happen at irregular intervals, the result may be inaccurate.

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XNPV: A More Accurate Alternative

Unlike NPV, XNPV considers the exact timing of cash flows, making it more precise when cash flows are irregular.

Example Excel Formula for XNPV

=XNPV(10%, B2:B4, A2:A4)

Where:

• A2:A4 contains the actual dates of cash flows.
• B2:B4 contains the corresponding cash flows.

✔ Use XNPV instead of NPV when cash flows do not occur at regular intervals.

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3. IRR vs. XIRR: Understanding the Difference

Internal Rate of Return (IRR)

IRR is the discount rate at which NPV becomes zero—in other words, the expected rate of return on an investment.

Excel Formula for IRR

=IRR(B1:B4)

Where B1:B4 contains the series of cash flows.

📌 Limitation: IRR assumes cash flows occur at regular intervals.

---

XIRR: A More Flexible Alternative

XIRR accounts for irregular cash flows by using exact dates.

Example Excel Formula for XIRR

=XIRR(B1:B4, A1:A4)

Where:

• A1:A4 contains dates.
• B1:B4 contains cash flows.

✔ Use XIRR instead of IRR when cash flows are received at different times.

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4. Key Cautions When Using NPV

🚨 Avoid These Common Mistakes:

1. Ignoring Initial Investment – Excel's NPV function does not automatically include the initial investment. Manually add it:

   =NPV(10%, B2:B4) + B1
   

2. Assuming Equal Intervals – If cash flows are not evenly spaced, use XNPV instead.
3. Misinterpreting Results – A positive NPV means a good investment, while a negative NPV means potential loss.

---

Conclusion

• Use CAGR to measure growth over time.
• Prefer XNPV over NPV for irregular cash flows.
• Choose XIRR instead of IRR for more accuracy when cash flows vary in timing.
• Always double-check assumptions to avoid errors in financial modeling.

By mastering these Excel functions, you can make more informed investment decisions and ensure accurate financial analysis.

Stock N Performance Breakdown: CAGR, NPV, IRR & Dividends Explained

Ever wondered how much your investment could grow over time? Understanding CAGR and other key financial metrics can help you unlock the true potential of your portfolio. In this guide, we'll break down Stock N's performance and show you exactly how to calculate your returns, including capital appreciation, dividends, and essential financial indicators like Net Present Value (NPV) and Internal Rate of Return (IRR).

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Step 1: Tabulate Your Cash Flow

To begin, record all the investment inflows and outflows associated with Stock N over the given period.

Step 2: Sum Up All Investment Outflows

The total amount invested in Stock N is calculated as follows:

• $3,224.48 + $3,224.48 + $4,646.38 + $4,377.63 = $15,472.97

Step 3: Sum Up All Holding Shares

The total number of shares accumulated:

• 10,000 + 10,000 + 10,000 + 24,000 + 7,500 = 61,500 shares

Step 4: Calculate the Average Cost Per Share

The average cost per share is determined by dividing the total investment by the total number of shares:

• $15,472.97 / 61,500 = $0.2516 per share

Step 5: Market Price Per Share

The latest market price per share is $0.530.

Step 6: Calculate Holding Return (Appreciation)

The appreciation of the stock from 2-Sep-06 to 22-Aug-11 is calculated using:

• (0.53 - 0.2516) / 0.2516 = 110.65%

• Alternatively, using total market value:

  • (32,595 - 15,472.97) / 15,472.97 = 110.65%

Step 7: Sum Up All Received Dividends

The total dividends received over the holding period:

• $290 + $386.90 + $585 + $630 + $631.80 + $891.75 + $889.25 + $889.25 + $889.25 = $6,083.20

Step 8: Calculate Holding Return (Dividend)

The return from dividends:

• $6,083.20 / $15,472.97 = 39.32%

Step 9: Calculate Total Holding Return (Appreciation + Dividend)

The overall return from stock appreciation and dividends:

• 110.65% + 39.32% = 149.97%

Step 10: Calculate NPV and IRR

To assess the investment's financial viability:

• NPV @ 15% = $7,532.12 (accepted)

• IRR = 32.12% per annum

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Stock N has demonstrated impressive growth over time, with a total return of 149.97% and an IRR of 32.12%. This performance outpaces many traditional investments, highlighting the importance of understanding key financial metrics when making investment decisions.

Would you like to analyze your own stock investments? Try these formulas and share your results in the comments.

Financial Planning for a 30s Unmarried Woman

0) Background:

To illustrate how a plan is tailored to a working woman's future expectations, I profile a 33-year-old Miss C, unmarried Singaporean PR. She has an annual income of SGD33,000 and a CPF balance of SGD20,000. She bought a shop lot for MYR250,000 at Kampar and the property is now worth about MYR300,000.

She has saved about SGD10,000 in fixed deposits and has about SGD10,000 invested in unit trusts and cash value of MYR5,000 in participating life insurance bought from her brother.

However, she complained her expanse is too high, which the less saving can not bring her to anywhere. Luckily she has less debt: only an outstanding shop lot mortgage of MYR225,000, for which the mortgage loan is paid MYR1,744.42 in interest and principal every month (=PMT(7%/12,20*12,-225000,0)). Luckily, his brother Hui shares the burden with her about 50-50. In additional, her monthly expenses are about SGD2,342.

She works very hard in order to get more overtime allowance. However, her outflow has over taken her inflow. Luckily, special provident fund does help her to offset the deficit of the net cash flow.

She has no sense of retirement planning. However, she assumes that she will need about SGD2,300 (in today's dollars) every month to sustain her lifestyle after retirement. She also hopes to run her own business 3 years from now e.g. florist, snack stall, giftshop, child nurturing center at Malaysia. To do this, she figures that she will need to raise MYR80,000 (in today’s dollar).

Take assumption of 1SGD=MYR2.5.

1) Working Comment:

Miss C is too dedicated to her work, it doesn't mean bad. But, she can’t work forever like this 7*11. What-if she falls sick suffering from the critical illnesses, then her dream of having her own family or business will be jeopardized. Further more, the nature of her current job leaves her no quality time of thinking how to kick start her own business. For her age typically, she must be at least at the senior executive position, at the average monthly salary SGD3500 (total annual income divided by 12). She needs to focus on the working value that pushes her career up to another level. It is normal that she faces the political resistance as everyone does in the working life.

2) Cash flow analysis:

Miss Chas single source income, which is only from her employment. 

Rental, food and shop lot loan are already consuming 68%. It is a heavy life living at Singapore.  

Cost of living comparison between Singapore, Singapore and Kuala Lumpur, Malaysia

	Singapore	Kuala Lumpur	Difference
Restaurants	[Edit]	[Edit]
Meal, Inexpensive Restaurant	9.83 S$	3.86 S$	-60.74 %
Meal for 2, Mid-range Restaurant, Three-course	39.68 S$	19.96 S$	-49.69 %
Combo Meal at McDonalds or Similar	6.57 S$	4.37 S$	-33.43 %
Domestic Beer (0.5 liter draught)	7.04 S$	3.87 S$	-44.94 %
Imported Beer (0.33 liter bottle)	8.21 S$	4.76 S$	-42.01 %
Coke/Pepsi (0.33 liter bottle)	1.26 S$	0.75 S$	-40.58 %
Water (0.33 liter bottle)	1.10 S$	0.48 S$	-56.01 %
Markets	[Edit]	[Edit]
Milk (regular), 1 liter	2.88 S$	2.07 S$	-28.12 %
Loaf of Fresh Bread	2.14 S$	1.15 S$	-45.92 %
Eggs (12)	2.37 S$	1.68 S$	-29.05 %
Fresh Cheese (1kg)	8.95 S$	7.24 S$	-19.14 %
Chicken Breasts (Boneless, Skinless), (1kg)	13.58 S$	5.52 S$	-59.33 %
Water (1.5 liter bottle)	1.84 S$	0.91 S$	-50.51 %
Bottle of Wine (Mid-Range)	22.77 S$	13.99 S$	-38.54 %
Domestic Beer (0.5 liter bottle)	5.41 S$	2.85 S$	-47.38 %
Imported Beer (0.33 liter bottle)	5.89 S$	3.77 S$	-35.98 %
Pack of Cigarettes (Marlboro)	10.99 S$	3.77 S$	-65.64 %
Transportation	[Edit]	[Edit]
One-way Ticket (local transport)	1.60 S$	1.02 S$	-36.06 %
Monthly Pass	46.79 S$	32.48 S$	-30.57 %
Taxi (5km within center)	8.86 S$	3.76 S$	-57.55 %
Gasoline (1 liter)	1.79 S$	0.78 S$	-56.26 %
Volkswagen Golf 1.4 90 KW Trendline (Or Equivalent New Car)	107,626.59 S$	71,008.77 S$	-34.02 %
Utilities (Monthly)	[Edit]	[Edit]
Basic (Electricity, Gas, Water, Garbage)	155.11 S$	53.42 S$	-65.56 %
1 min. of Prepaid Mobile Tariff (no discounts or plans)	0.26 S$	0.18 S$	-33.60 %
Internet (4 Mbps, Flat Rate, Cable/ADSL)	36.69 S$	44.19 S$	+20.43 %
Sports And Leisure	[Edit]	[Edit]
Fitness Club, Monthly Fee for 1 Adult	121.40 S$	61.90 S$	-49.01 %
Tennis Court Rent (1 Hour on Weekend)	10.38 S$	8.29 S$	-20.11 %
Cinema, International Release, 1 Seat	8.99 S$	5.21 S$	-42.07 %
Clothing And Shoes	[Edit]	[Edit]
1 Pair of Levis 501	129.65 S$	104.55 S$	-19.36 %
1 Summer Dress in a Chain Store (Zara, H&M, ...)	91.94 S$	93.97 S$	+2.21 %
1 Pair of Nike Shoes	127.79 S$	92.89 S$	-27.31 %
1 Pair of Men Leather Shoes	125.23 S$	93.42 S$	-25.40 %
Rent Per Month	[Edit]	[Edit]
Apartment (1 bedroom) in City Centre	2,505.23 S$	385.89 S$	-84.60 %
Apartment (1 bedroom) Outside of Centre	1,498.61 S$	247.58 S$	-83.48 %
Apartment (3 bedrooms) in City Centre	5,399.45 S$	845.45 S$	-84.34 %
Apartment (3 bedrooms) Outside of Centre	3,308.39 S$	578.60 S$	-82.51 %
Buy Apartment Price	[Edit]	[Edit]
Price per Square Meter to Buy Apartment in City Centre	16,816.86 S$	1,684.70 S$	-89.98 %
Price per Square Meter to Buy Apartment Outside of Centre	8,549.38 S$	1,117.20 S$	-86.93 %
Salaries And Financing	[Edit]	[Edit]
Median Monthly Disposable Salary (After Tax)	3,301.10 S$	1,404.76 S$	-57.45 %
Mortgage Interest Rate in Percentanges (%), Yearly	2.43	4.56	+87.66 %

Currency : SGD
Source: http://www.numbeo.com/

3) Networth Analysis

4) Financial Ratio

a) Liquidity Ratio = Cash, or near cash/Monthly expenses
	8.54	Month		good
(Comment: More than meet the benchmark band of 3 – 6 months of expenses)
b) Liquid Assets to Net Worth
	32.22%
(Comment: higher liquidity – may be a bit easy or more flexible in converting or restructuring assets in case of an immediate investment opportunity)
c) Solvency Ratio = Net Worth/Total Assets
	58.56%
(Comment: Relatively high solvency. Financial stability is ranked as strong)
d) Debt to Asset ratio = Total Liabilities/Total Assets
	41.44%			good
(Comment: allow to be higher if risk profile permits)
e) Saving ratio = Annual Saving/Take Home Pay
	8.63%			no good
(Comment: far to the national saving rate of about 30%. However, in this calculation, savings in insurance policies, car and housing loan repayments on principals are excluded. If included, the cash values of such payments will add to the ratio.)
f) Debt Servicing Ratio = Total Serving Loan/Total Inflow
	12.68%			good

5) Future Expectation

Current Liquid Asset	SGD 20,000.00
Saving Duration	3	year
Expected Today Amount	SGD 32,000.00
Inflation	3%	p.a.
Expected Future Amount	SGD 34,967.26
Investment Rate	10%	p.a.
PMT@ROI=8%	($3,010.42)		Failed as net cash flow < PMT
PMT@ROI=10%	($2,521.83)		Accepted as net cash flow > PMT
Action Item:
1. Seek Hui to invest SGD2522 annually in UT for at least 10%p.a. return

6. Retirement Planning

Step 1(A): Retirement income needed – Target replacement ratio (TRR)
Description: Miss C, 33 years old, she earns SGD 33000 p.a. Her yearly increment is 0.03. She seeks for the feasibility of maintaining her life style during her retirement age.
Age (Now)	33
Age (Retire)	60.00
Increment	3%	p.a.
Annual salary	SGD 33,000.00
His last drawn salary			SGD 71,167.51
Assumption:
TRR(50%, e.g. less commitment)
		50%	SGD 35,583.76
TRR(60%, e.g. child educational funded by own, bad health family members etc)
		60%	SGD 42,700.51
TRR(70%, e.g. loan not clear yet, child educational funded by own, bad health family members etc)
		70%	SGD 49,817.26
Note: Higher TRR produces higher security but high cost too. Thus, another method is studies.
Step 1(B): Retirement income needed – Expenses method
Description: Miss C's outflow is SGD 28102.61 with estimated inflation rate at 0.02 p.a.
Outflow (Now)	(SGD 28,102.61)
Inflation (Low)	2.00%	p.a.
Future annual expenses at age 60 year old.
			SGD 47,967.97
Step 2: Retirement Fund calculation
Let’s take future annual expenses at age 60 year old is SGD 49817.26.
Life expectancy (Malaysian/Singaporean: 75 years old, +10 year as buffer).
Medical development human life is getting more advances. Thus, it will be reviewed from time to time .
Two approaches for the retirement fund calculation: (A) principal liquidation and (B) Principal intact.
Life (Low)	75
Life (High)	85
Life (Decide)	85
ROI	8.00%	p.a.
Inflation	2.00%	p.a.
Step 2 (A): Retirement Fund calculation – Principal Liquidation
Retirement fund (without inflation), 2Ai
			SGD 574,331.13
Retirement fund (with inflation), 2Aii
			SGD 681,896.57
Step 2 (B): Retirement Fund calculation – Principal intact.
Retirement fund (without inflation), 2Bi
			SGD 672,532.99
Retirement fund (with inflation), 2Bii
			SGD 896,710.65
Conclusion: From 2Ai, 2Aii, 2Bi and 2Bii, it is recommended 2Aii, SGD 681896.57  realistically.
Step 3: Retirement Funding Calculation
Insurance/UT agent will based on the SGD 681896.57 to work out the annual payment in order to close the deal fast.
Product ROI	10%	p.a.
No other Resource, PMT p.a.
			(SGD 5,118.96)
			Impossible!
Net Investible Income@33	SGD 20,000.00
Current portfolio return	4.00%	p.a
Improved portfolio return	10.43%	p.a	Solver solved
Retirement Fund	SGD 681,896.57
CPF	2.00%	p.a
Net Investible Income@60@4%			SGD 57,667.37
Net Investible Income@60@10.43%			SGD 291,465.05
CPF@60@2%			SGD 390,431.52
Total Retirement Fund@60@Current Return			SGD 448,098.89
Total Retirement Fund@60@Improved Return			SGD 681,896.57
Shortfall/(Excess)@4%			SGD 233,797.68
Thus, NIA equals required fund, she may stop work after 60 provided her investment return improved from 4% to 10.43%.