Get startedGet started for free

Financial returns (1)

Time for some application! Earlier, Lore taught you about financial returns. Now, its time for you to put that knowledge to work! But first, a quick review.

Assume you have $100. During January, you make a 5% return on that money. How much do you have at the end of January? Well, you have 100% of your starting money, plus another 5%: 100% + 5% = 105%. In decimals, this is 1 + .05 = 1.05. This 1.05 is the return multiplier for January, and you multiply your original $100 by it to get the amount you have at the end of January.

105 = 100 * 1.05

Or in terms of variables:

post_jan_cash <- starting_cash * jan_mult

A quick way to get the multiplier is:

multiplier = 1 + (return / 100)

This exercise is part of the course

Introduction to R for Finance

View Course

Exercise instructions

  • Your new starting cash, January's return, and January's return multiplier have been defined for you.
  • Use them to calculate post_jan_cash.
  • Print post_jan_cash.
  • What if the return for January was 10%? Calculate the new jan_mult_10.
  • Calculate post_jan_cash_10 using the new multiplier!
  • Print post_jan_cash_10 to see the impact of different interest rates!

Hands-on interactive exercise

Have a go at this exercise by completing this sample code.

# Variables for starting_cash and 5% return during January
starting_cash <- 200
jan_ret <- 5
jan_mult <- 1 + (jan_ret / 100)

# How much money do you have at the end of January?
post_jan_cash <- 

# Print post_jan_cash


# January 10% return multiplier
jan_ret_10 <- 10
jan_mult_10 <- 

# How much money do you have at the end of January now?
post_jan_cash_10 <- 

# Print post_jan_cash_10
Edit and Run Code