Strubeck Corporation sponsors a pension plan for its employees. It manages part of the equity portfolio in-house and delegates management of the balance to Super Trust Company. As chief investment officer of Strubeck, you want to review the performance of the in-house and Super Trust portfolios over the last four quarters. You have arranged for outflows and inflows to the portfolios to be made at the very beginning of the quarter. The table below summarizes the inflows and outflows as well as the two portfolios’ valuations. In the table, the ending value is the portfolio’s value just prior to the cash inflow or outflow at the beginning of the quarter. The amount invested is the amount each portfolio manager
Strubeck Corporation sponsors a pension plan for its employees. It manages part of the
equity portfolio in-house and delegates management of the balance to Super Trust
Company. As chief investment officer of Strubeck, you want to review the performance
of the in-house and Super Trust portfolios over the last four quarters. You have arranged
for outflows and inflows to the portfolios to be made at the very beginning of the
quarter. The table below summarizes the inflows and outflows as well as the two
portfolios’ valuations. In the table, the ending value is the portfolio’s value just prior to
the cash inflow or outflow at the beginning of the quarter. The amount invested is the
amount each portfolio manager is responsible for investing.
Table 1: Cash Flows for the In-House Strubeck Account and the Super Trust
Account
Period Quarters
1 2 3 4
In-House Account
Beginning value 4,000,000 6,000,000 5,775,000 6,720,000
Beginning of period
inflow (outflow) 1,000,000 (500,000) 225,000 (600,000)
Amount invested 5,000,000 5,500,000 6,000,000 6,120,000
Ending value 6,000,000 5,775,000 6,720,000 5,508,000
Based on the information given, address the following.
Calculate the time-weighted rate of return for the in-house account.
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