What is the theory behind ^(1/N)? Why N can represent the number of years of investment?
I'm studying Holding period return (HPR) now~
the formula is:
HPR= (ending value of investment/ beginning value of investment)^(1/N)
where N refers to number of years。
Why we need to use ^1/N and we dont use divided to get the average?
what is the theory behind the ^(1/N) in finance or math?
coz most of the finance formula will use ^(1/N) whenever we need to calculate things that more than a year.
pls help me :(
Investment best answer:
Answer by Pranil
formula is
ending value of investment = beginning value of investment)(1 + r/100)^N
ending value of investment /beginning value of investment) = (1 + r/100)^N taking N th root
ending value of investment /beginning value of investment)^1/N = 1 + r/100
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Investment
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