17 July 2014
hello can anyone guide m how to calculate effective yield in case of multiple unequal cash flows
ex. mr. a deposited following in rd
1Jan 85500
1 Feb 87000
1 march 100000
and say maturity amount is 300000 on 1 Aug
what is effective yield on investments made considering time value
Step 1. Compute the number of days for which the money was paid. For eg for money paid on 1 January, the days shall be 1 august less 1 1 January, giving you 212 days.
Step 2. Then multiply the each amount paid with corresponding number of days.
Step 3. add up the products computed in step 2.
step 4 divide the sum computed in step 3 by sum of amounts paid. this will give you average number of days for which interest is to be computed.
step 5. use the formula sum of amounts paid*x*no of days computed step 4/365 + sum of amounts paid = Rs 300000
CAclubindia
