On 1st April 2017 an investment fund had a value of £3 million. Further net cash flows of £200,000 and £300,000 were received on 1st October 2018 and on 1st April 2019. The fund had a value of £3.4 million on 30th September 2018 and a value of £3.7 million on 31st March 2019. The value of the fund on 31st March 2020 was £4 million. For the period 1st April 2017 to 31st March 2020, calculate the following to the nearest 0.1%: The annual effective time-weighted rate of return earned on the fund. (i) The annual effective money-weighted rate of return earned on the fund. (iii) Explain, with reasons, which of the two methods for calculating the rate of return, referred to in parts (i) and (ii) above, is most appropriate for assessing the performance of the investment manager overseeing the fund during the given period of time. (ii)
On 1st April 2017 an investment fund had a value of £3 million. Further net cash flows of £200,000 and £300,000 were received on 1st October 2018 and on 1st April 2019. The fund had a value of £3.4 million on 30th September 2018 and a value of £3.7 million on 31st March 2019. The value of the fund on 31st March 2020 was £4 million. For the period 1st April 2017 to 31st March 2020, calculate the following to the nearest 0.1%: The annual effective time-weighted rate of return earned on the fund. (i) The annual effective money-weighted rate of return earned on the fund. (iii) Explain, with reasons, which of the two methods for calculating the rate of return, referred to in parts (i) and (ii) above, is most appropriate for assessing the performance of the investment manager overseeing the fund during the given period of time. (ii)
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
Using formulas, no tables
correct answers:
i) 0.052169 pa
ii) let NFV(5%)= 0.003061 and let NFV(4%)= -0.101289, Then i = 0.0497 pa
Transcribed Image Text:On 1st April 2017 an investment fund had a value of £3 million. Further net cash flows of £200,000 and
£300,000 were received on 1st October 2018 and on 1st April 2019.
The fund had a value of £3.4 million on 30th September 2018 and a value of £3.7 million on 31st March
2019. The value of the fund on 31st March 2020 was £4 million.
For the period 1st April 2017 to 31st March 2020, calculate the following to the nearest 0.1%:
(i)
(ii)
The annual effective time-weighted rate of return earned on the fund.
The annual effective money-weighted rate of return earned on the fund.
(iii) Explain, with reasons, which of the two methods for calculating the rate of return, referred to in
parts (i) and (ii) above, is most appropriate for assessing the performance of the investment
manager overseeing the fund during the given period of time.
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