Effective yield

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sanchit jain (Querist)
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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)
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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