- Option : A
- Explanation : Money-weighted rate of return is the internal rate of return (IRR) of the cash flows resulting from the investment activity. To calculate the money weighted rate of return for the investor, using financial calculator enter the following cash flows: CF0 = (-53 x 2) = - 106, CF1 = 6, CF2 = 6, CF3 = 6, CF4= 6 + (45 * 2) = 96, Compute IRR: IRR = 1.998% ~ 2.0%.

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- Option : B
- Explanation : The money-weighted rate of return is the internal rate of return (IRR) of the cash flows associated with the investment. Using a financial calculator, compute IRR. CF0 = – 44, CF1 = 4, CF2 = 5, CF3 = 49.50, CPT IRR. IRR = 10.87%.

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20. An investor purchases 100 shares of a stock. The history of this investment is outlined below:

Time | Activity | Price perShare ($) | Dividend perShare ($) |

Begining of Year 1 | Buy 100 shares | 20.00 | |

End of Year 1 | Buy 20 shares | 22.00 | 2.00 |

End of Year 2 | 25.00 | 2.50 | |

End of Year 3 | Sell 120 shares | 24.00 |

- Option : A
- Explanation : The time-weighted rate of return measures the compound growth rate of $1 initially invested in the portfolio over a stated measurement period. TWR = 3√{[(22 + 2)/20] * [(25 + 2.5)/22] * [(24/25)]} – 1 = 0.1292.

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