XYZ's stock price and dividend history are as follows: Dividend Paid at Year-End $4 4 4 Year 2018 2019 2020 2021 Beginning-of-Year Price $ 102 122 92 102 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
XYZ's stock price and dividend history are as follows: Dividend Paid at Year-End $4 4 4 Year 2018 2019 2020 2021 Beginning-of-Year Price $ 102 122 92 102 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
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter12: Valuation: Cash-flow Based Approaches
Section: Chapter Questions
Problem 1FIC
Related questions
Question
![XYZ's stock price and dividend history are as follows:
Beginning-of-Year Dividend paid at
Price
$ 102
122
92
102
Year
2018
2019
2020
2021
Year-End
$4
Arithmetic average rate of return
Geometric average rate of return
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.
4
4
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.)
Dollar-weighted 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 i
and error.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.)
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F44a96e91-4300-4ad2-9999-91961f12be90%2F966a6664-1b7c-49a9-83c8-492f5ed9f574%2Fznwsb5c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:XYZ's stock price and dividend history are as follows:
Beginning-of-Year Dividend paid at
Price
$ 102
122
92
102
Year
2018
2019
2020
2021
Year-End
$4
Arithmetic average rate of return
Geometric average rate of return
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.
4
4
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.)
Dollar-weighted 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 i
and error.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.)
%
%
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