a. What are the arithmetic and geometric average time-weighted rates of return for the investor? Note: Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations. b. What is the dollar-weighted rate of return? (Hint. Carefully prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate internal rate of return, you will have to use trial and error.) Note: Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.
a. What are the arithmetic and geometric average time-weighted rates of return for the investor? Note: Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations. b. What is the dollar-weighted rate of return? (Hint. Carefully prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate internal rate of return, you will have to use trial and error.) Note: Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Pm.1
Transcribed Image Text:### XYZ's Stock Price and Dividend History
Below is the stock price and dividend history for XYZ:
| Year | Beginning-of-Year Price | Dividend Paid at Year-End |
|------|-------------------------|---------------------------|
| 2020 | $110 | $4 |
| 2021 | $120 | $4 |
| 2022 | $100 | $4 |
| 2023 | $110 | $4 |
### Scenario
An investor buys three shares of XYZ at the beginning of 2020, buys another two shares at the beginning of 2021, sells one share at the beginning of 2022, and sells all four remaining shares at the beginning of 2023.
### Required Analysis
**a. What are the arithmetic and geometric average time-weighted rates of return for the investor?**
- **Note:** Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations.
**b. What is the dollar-weighted rate of return?**
- **Hint:** Carefully prepare a cash flow chart for the four dates corresponding to the turns of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate the internal rate of return, you will have to use trial and error.
- **Note:** Round your answer to 4 decimal places. Negative amounts should be indicated by a minus sign.
### Results
| Measure | Result |
|-------------------------------------|-----------------|
| a. Arithmetic average rate of return | % |
| a. Geometric average rate of return | % |
| b. Dollar-weighted rate of return | % |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education