XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividends Paid at Year-End 2015 $100 $4 2016 110 4 2017 90 4 2018 95 4 An investor buys three shares of XYZ at the beginning of 2015, buys another two shares at the beginning of 2016, sells one share at the beginning of 2017, and sells all four remaining shares at the beginning of 2018. What are the arithmetic and geometric average time-weighted rates of return for the investor? 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, 2015, to January 1, 2018. If your calculator can not calculate internal rate of return, you will have to use a spreadsheet or trial and error.)
- XYZ stock price and dividend history are as follows:
Year Beginning-of-Year Price Dividends Paid at Year-End
2015 $100 $4
2016 110 4
2017 90 4
2018 95 4
An investor buys three shares of XYZ at the beginning of 2015, buys another two shares at the beginning of 2016, sells one share at the beginning of 2017, and sells all four remaining shares at the beginning of 2018.
- What are the arithmetic and geometric average time-weighted
rates of return for the investor? - 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, 2015, to January 1, 2018. If your calculator can not calculate
internal rate of return , you will have to use a spreadsheet or trial and error.)
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