Dump question.

How would you determine the annual return if I:

Started in Jan with $25K.

Made profit of $10K in the first 6 months.

Added new capital of $20K to the account in 1 Jul (so account is now $55K)

Made profit of $10K in the next 3 months.

Added new capital of $20K to the account in 1 Oct (account now $75K)

Made profit of $10K in the last 3 months.

Here are 3 possible solutions:

1. Total profit = $30K. Total capital put in = $65K. Return = 46.2%

2. Total profit = $30K. Time weighted capital = $40K. Return = 75%

3. Time weighted average of annualised return for each period. So period 1 = 40% over 6 months, period 2 = $10k/$55K over 3 months, period 3 = $10K / $75K over 3 months. Average to be ~71.5%

4. Similar to 3 above but exclude the compounding profits in calculating the annualised returns. This works out to be ~77.7%

Any others?

I know this is mostly academic, but just wondering if there's an usual way of looking at it.

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