Annual Return Calculation

The formula for the annual return calculation, is :

R_A= (1+Q₁R) x (1+Q₂R) x (1+Q₃R) x (1+Q₄R) - 1

Where
R_A = Annual Return
Q₁R = Return for Q1
Q₂R = Return for Q2
Q₃R = Return for Q3
Q₄R = Return for Q4

The same formula applies for calculating the return for any aggregage time period from returns of subperiods. For example, the formula for the estimation of the compounded annual return from monthly returns is:

[(1+ M₁R) x (1+ M₂R) x .... x (1+ M₁₂R)] - 1

where:

M₁R = Monthly return for first month
M₂R = Monthly return for second month
M₁₂R = Monthly return for twelfth month

Annual Return Calculation Example

In order to demonstrate the application of the formula for the calculation of the annual return consider a property investment with the following estimated quarterly rates of return:

Q₁R =2%
Q₂R = 2.5%
Q₃R = 1.5%
Q₄R = 3%

Then the compounded annual return can be calculated as:

R_A = (1.02 x 1.025 x 1.015 x 1.03) – 1 = 9.3%

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Return from Annual Return Calculation to Property Investment Analysis