XYZ's stock price and dividend history are as follows: Beginning-of-Year Price Year 2018 $ 134 2019 161 121 134 2020 2021 Dividend Paid at Year-End $ 4 4 4 An investor buys three shares of XYZ at the beginning of 2018, buys another two shares at the beginning of 2019, sells one share at the beginning of 2020, and sells all four remaining shares at the beginning of 2021. a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations.) Arithmetic average rate of return Geometric average rate of return % % b. 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, 2018, to January 1, 2021. If your calculator cannot calculate internal rate of return, you will have to use trial and error.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.) Dollar-weighted rate of return %
XYZ's stock price and dividend history are as follows: Beginning-of-Year Price Year 2018 $ 134 2019 161 121 134 2020 2021 Dividend Paid at Year-End $ 4 4 4 An investor buys three shares of XYZ at the beginning of 2018, buys another two shares at the beginning of 2019, sells one share at the beginning of 2020, and sells all four remaining shares at the beginning of 2021. a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations.) Arithmetic average rate of return Geometric average rate of return % % b. 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, 2018, to January 1, 2021. If your calculator cannot calculate internal rate of return, you will have to use trial and error.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.) Dollar-weighted rate of return %
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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Transcribed Image Text:XYZ's stock price and dividend history are as follows:
Beginning-of-Year
Price
Year
2018
$ 134
2019
161
121
134
2020
2021
Dividend Paid at
Year-End
$ 4
4
4
An investor buys three shares of XYZ at the beginning of 2018, buys another two shares at the beginning of 2019, sells one share at
the beginning of 2020, and sells all four remaining shares at the beginning of 2021.
a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Round your year-by-year rates of
return and final answers to 2 decimal places. Do not round other calculations.)
Arithmetic average rate of return
Geometric average rate of return
%
%
b. 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, 2018, to January 1, 2021. If your calculator cannot calculate internal rate of return, you will have to use trial
and error.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.)
Dollar-weighted rate of return
%
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