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Author: vtaeger Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75791  
Subject: Re: Analyzing 401(k) statement Date: 1/23/1998 5:23 PM
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TMFPixy gave you a good formula to use.

Since your a math major :)

A linear model is good enough for short periods.
You can ignore second order effects.

In other words: compound interest takes time to
make a difference.

As long as your ROR over the 6 months is
less than 25% (56% annualized return)
the error of a linear model is less than 1%.
(i.e. the linear model gives a ROR of 24%)
If your ROR is greater (you lucky dog) buy
a financial calculator, you can afford it!

A much bigger source of error over a short
period is when you made the contribution.
It can make a big difference if you made the
first contribution at the start of the 6 month
period or 2 weeks later.

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