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7. On 1 January 2005 an investment fund is worth £120,000. On 1 January 2006 the value has increased to £128,000 and a new investor joins the fund and deposits £10,000. On 1 January 2007 the value has decreased to £130,000 and £30,000 is withdrawn. On 1 January 2008 the investment funds is worth £110,000. (a) Compute the rate of return (rounded to a percentage point) by both the money-weighted and the time-weighted method. Why is the time-weighted rate of return higher?

7. On 1 January 2005 an investment fund is worth £120,000. On 1 January 2006 the value has increased to £128,000 and a new investor joins the fund and deposits £10,000. On 1 January 2007 the value has decreased to £130,000 and £30,000 is withdrawn. On 1 January 2008 the investment funds is worth £110,000. (a) Compute the rate of return (rounded to a percentage point) by both the money-weighted and the time-weighted method. Why is the time-weighted rate of return higher?

Advanced Engineering Mathematics
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
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7. On 1 January 2005 an investment fund is worth £120,000. On 1 January 2006 the value has increased to £128,000 and a new investor joins the fund and deposits £10,000. On 1 January 2007 the value has decreased to £130,000 and £30,000 is withdrawn. On 1 January 2008 the investment funds is worth £110,000. (a) Compute the rate of return (rounded to a percentage point) by both the money-weighted and the time-weighted method. Why is the time-weighted rate of return higher?
Transcribed Image Text:7. On 1 January 2005 an investment fund is worth £120,000. On 1 January 2006 the value has increased to £128,000 and a new investor joins the fund and deposits £10,000. On 1 January 2007 the value has decreased to £130,000 and £30,000 is withdrawn. On 1 January 2008 the investment funds is worth £110,000. (a) Compute the rate of return (rounded to a percentage point) by both the money-weighted and the time-weighted method. Why is the time-weighted rate of return higher?
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