EFTA02409490.pdf

Annualization Charts Asset That Loses $1 Per Day for 100 Days . •Asset Price Daily % Return (Right Axis) 120 0% -20% -40% -60% -80% 100% t. CS 4' 9 + §.) 0* a0 hi' 40 rat' CI rots '01 1(t) 00 Ot* 00 41" cbc° Asset That Loses -1.38% Per Day for 100 Days 2 ' 0Asset Price i Daily % Return (Right Axis) 120.0 2.00% 1.50% 100.0 Asset price = 50 on Day 50 1.00% 80.0 0.50% 60.0 Asset price = 25 on Day 100 0.00% -0.50% 40.0 -1.00% 20.0 -1.50% 2.00% O a tq'1•„010 gib 41 9 tco o as at 9 tb 9 crY" 00 Al, cot' 00 91' ob Narrative Chart 1 displays an asset with a constant dollar loss. On day 1, the percent return (red line) is -1%. By day 90, the daily percent return is -8%. At day 100 it is -100%. Chart 2 displays an asset with a constant percentage daily loss. This is the logic of annualizing returns, which is employed by the charts program. At a constant rate of loss (represented by the red line), the asset does not decline linearly. At day 50, the price of both assets is 50. Annualizing* the 50 days of performance will yield different results, depending on whether you are projecting dollar losses or % losses. Chart 2 is the method in general usage. ' I am assuming that years contain 100 days for the sake of simplicity. EFTA_R1_01469753 EFTA02409490