The modified Dietz return is typically calculated in steps. The following example illustrates the method of calculation:

If the beginning and end market values of an investment are $500 and $600, respectively (including any accrued income), and a cash flow occurs on the 25^th of a 30-day month, then:

First step: calculate the adjusted factor

CF adjustment factor = (30-25)/30 = 0.1667

Second step: adjust the cash flow

Adjusted cash flow= CF_i x adjustment factor

Adjusted cash flow= 60 x 0.1667 = $10

Third step: plug the modified cash flow in the formula of return calculation

Modified Dietz return = [(600-500-60)/ (500+10)] x 100 = 7.84%

This return, as shown in the above example, is affected by both the timing and size of the cash flows during the measurement period.