Modified Dietz method: Difference between revisions

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The (unannualized) internal rate of return in this example is 125%:
 
:<math>300 = 100 \times (1 + 125\%)+ 50 \times (1+125\%)^ \frac{2 - 1}{2} = 225 + 50 \times 150\% = 225 + 75 = 300</math>
 
so in this case, the modified Dietz return is noticeably less than the unannualized IRR. This divergence between the modified Dietz return and the unannualized internal rate of return is due to a significant flow within the period, and the fact that the returns are large.