Calculating RoR given 3 basic Variables

  • Thread starter An Indiot
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In summary, the formula for calculating risk of ruin is 100% - [Equity + (ROI x Equity)], and it can be adjusted for different objectives such as doubling up or 1000x.
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An Indiot
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So I want to calculate Risk of ruin from this 3 variables.
Capital
Unit of Investment
ROI per Unit
for simplification purposes let's assume it is a double or nothing scenario.
I have only gotten this far.
RoR to double up=100%-[Equity + (Roi.Equity)]

This only applies when Capital= Unit of Investment
I don't know what a full formula including capital and unit of ivesment variables would be.
And what would the formula to calculate more advanced RoR values like RoR when your objective isn't to double up but to 1000x.
Thanks
What would the correct formula be?
 
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  • #2
The formula for calculating risk of ruin (RoR) is: RoR = 100% - [Equity + (ROI x Equity)]. This formula applies regardless of the capital and unit of investment variables. To calculate more advanced RoR values such as when your objective isn't to double up but to 1000x, you will need to adjust the formula accordingly. For example, if your objective is to 1000x, then the formula would be: RoR = 100% - [Equity + (1000 x ROI x Equity)].
 

1. How do you calculate RoR (Rate of Return) given 3 basic variables?

The formula for calculating RoR is (Ending Value - Beginning Value) / Beginning Value. The three basic variables needed are the ending value, beginning value, and the time period.

2. What is the importance of calculating RoR?

Calculating RoR is important because it provides a measure of the profitability or efficiency of an investment. It allows investors to compare the return on different investments and make informed decisions.

3. Can RoR be negative?

Yes, RoR can be negative if the ending value is less than the beginning value, indicating a loss on the investment.

4. How does the time period affect the RoR calculation?

The longer the time period, the lower the RoR will be, assuming all other variables remain the same. This is because the investment has more time to fluctuate and potentially decrease in value.

5. Is RoR the only factor to consider when evaluating an investment?

No, RoR is only one factor to consider when evaluating an investment. Other factors such as risk, liquidity, and potential for future growth should also be taken into account.

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