PS....

I wrote:
SAR wrote:
We can calculate the return on investment with no problem. What we want to
do is make the rate compound quarterly, rather than annualy.
[....]
If the annual IRR is "r", the equivalent quarterly compounded rate is
one of the following, which are equivalent:
=(1+r)^(1/4) - 1
=rate(4, 0, -1, 1+r)

That presumes that the annual IRR was computed "correctly" in the first
place. If instead you computed the annual IRR by calculating a
sub-annual rate, then multiplying by the number of periods per year --
which is quite common, sad to say -- you should reverse that to recover
the sub-annual rate, then compound it to compute the "correct" annual
IRR. Of course, if your sub-annual rate was quarterly to begin with,
you can dispense with compounding.

If you are unsure of how the annual IRR was computed, it really does
not matter much if you divide or exponentiate. To give you a
worst-case idea, 12%/365 is 0.03288%, whereas (1+12%)^(1/365)-1 is
0.03105% -- a difference of less than $75 per $10,000 compounded daily
for a year.