$1,000 is invested in a fund at the beginning of the year. The fund rate of return is 8% for the first half of the year, and 10% for the second half. You are given the following methods of determining return, given the indicated transactions:ScenarioReturn MeasureMidyear TransactionIDollar-weighted$500 depositIIDollar-weighted$500 withdrawalIIITime-weighted$500 depositIVTime-weighted$500 withdrawalRank the rates of returns under these scenarios.A. I < II = IV < IIIB. II < III = IV < IC. III < I = II < IVD. IV < I = II < IIIE. None of these answers is correct.

Investment amount = $1000 Interest rate is divided semi annually First half year, Interest rate = 8%…

Answered: $1,000 is invested in a fund at the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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$1,000 is invested in a fund at the beginning of the year. The fund rate of return is 8% for the first half of the year, and 10% for the second half. You are given the following methods of determining return, given the indicated transactions:

Scenario	Return Measure	Midyear Transaction
I	Dollar-weighted	$500 deposit
II	Dollar-weighted	$500 withdrawal
III	Time-weighted	$500 deposit
IV	Time-weighted	$500 withdrawal

Rank the rates of returns under these scenarios.

A. I < II = IV < III

B. II < III = IV < I

C. III < I = II < IV

D. IV < I = II < III

E. None of these answers is correct.

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