Formula for RoR with ROI and Capital to investment ratio.

In summary, the conversation discusses various financial terms and their relationships, including Capital, Investment, RoR, ROI, Odds, Equity, and a formula for calculating winner takes all scenarios. The formula takes into consideration the ratio of Capital to Investment, with a higher ratio resulting in a smaller edge. The exact factor and how it acts are still being determined.
  • #1
An Indiot
8
0
Capital=All of your money.
Investment= Portion of your money invested per unit ( day/month/hand/game)
RoR= Odds that you will go broke
RoR@X= Odds that your Capital will be less than Unit of Investment before reaching X.
ROI= Return on investment, measured by percentage per unit of investment, represents your edge.
Odds= Ratio of money invested to potential winnings.
Equity= Portion of the potential winnings that is ours on expected value, affected by ROI. (1/2 for a coinflip 1/6 for dices etc…)
Calculated by “Equity= Odds+ROI.Odds”

This is only for calculating winner takes all scenarios.
I have only figured so far formulas for situations where Capital=Investment.
So if
X= 2Capital
Capital=1
Investment=1
ROI=3%
Odds= ½

Then
First we calculate our equity
1/2+3%/2 = 51.5%
RoR@X= 100-51.5%= 48.5%
So formula is
RoR= 100%-(Equity)

What would an appropriate formula that takes into consideration Capital to investment ratio be.
I can only struggle to figure that there is a factor where the higher the ratio is the closer it will bring the edge to 100%:

Following the same variables as before but:
Equity=1/4


Then I calculate the reverse of the equity.

Feq= 1-1/4
(? Is a mysterious operator)
25%+3%?factor.Feq
25%+ 99.999.Feq
25%+ 99.999.3/4
25%+ 75%
25
Somehow…
My question is, what is the factor and how does it act?
What would the formula be?
 
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  • #2
The formula would be: ROI = 100% - (Equity + (1 - Equity) * Factor), where Factor is a number between 0 and 1 that represents the ratio of Capital to Investment. The higher the ratio, the closer it will bring the edge to 100%.
 

FAQ: Formula for RoR with ROI and Capital to investment ratio.

What is the formula for calculating RoR?

The formula for calculating RoR (Rate of Return) is: (ROI / Capital) x 100.

What does ROI stand for?

ROI stands for Return on Investment, which is a measure of profitability that is calculated by dividing the net profit by the cost of the investment.

How do I calculate the Capital to Investment Ratio?

The Capital to Investment Ratio is calculated by dividing the total capital invested by the total cost of the investment. The formula is: Capital to Investment Ratio = Total Capital Invested / Total Cost of Investment.

Why is it important to calculate RoR with ROI and Capital to Investment Ratio?

Calculating RoR with ROI and Capital to Investment Ratio allows you to measure the profitability and efficiency of an investment. It also helps in making informed decisions about future investments.

Can the formula for RoR with ROI and Capital to Investment Ratio be applied to any type of investment?

Yes, the formula for RoR with ROI and Capital to Investment Ratio can be applied to any type of investment, as long as you have the necessary data to calculate the ROI and total capital invested.

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