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Effective yield

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sanchit jain (Querist)

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

Nikhil Kaushik

Nikhil Kaushik (Expert)

17 July 2014 you need to use sum product formula.

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

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