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
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Solution:
Time-weighted returns are the rate of interest at which the investment is analyzed on its earning potential over a period of time at a certain rate required to earn on an investment due to the concept of the time value of money. The formula for calculating the time-weighted return is shown as under:
where,
Vt=Value of the stock at the end of period t
Vt-1=Value of the stock at the previous period
Dt=Dividends received during period t
Dept=Deposits made during period t
Wt=Withdrawals made during period t
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