# Comparing interest rate and yearly stock return

I would like to compare the interest rate with the yearly return of a stock A and plot the 2 lines into 1 graph.

The interest rate, which is also a yearly return, is on any given date determined by the central bank. Say that I know that the interest rate is 3% on 1st of Jan 2000. So then I plot 3% for the 1st of Jan 2000.

Which yearly return of stock A should I then plot to make the comparison with this interest rate proper? Some options that I have thought of are:

1. $\mathrm{yearly return(1 Jan 2000)= \frac{(stock index, 1 Jan 2000)- (stock index, 1 Jan 1999)}{stock index, 1 Jan 1999}}$

or:

1. $\mathrm{ yearly return(1 Jan 2000)= \frac{(stock index, 1 Jan 2001)- (stock index, 1 Jan 2000)}{(stock index, 1 Jan 2000)}}$

Which of these methods is the correct way, or do you propose something else?

• This sounds more appropriate for the Personal Finance and Money SE – xan Apr 30 '15 at 14:37
• @user3697176 post that as an answer! – shadowtalker May 4 '15 at 12:58