XYZ's stock price and dividend history are as follows: Year Beginning-of-Year Price 2019 2020 2021 2022 $ 72 92 62 72 Dividend Paid at Year-End $4 An Investor buys three shares of XYZ at the beginning of 2019, buys another two shares at the beginning of 2020, sells one share at the beginning of 2021, and sells all four remaining shares at the beginning of 2022. Required: 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.) Answer is complete but not entirely correct. 9.22% 5.45% 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, 2019, to January 1, 2022. If your calculator cannot calculate IRR, you will have to use trial and error or a spreadsheet program.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.) Answer is complete and correct.
XYZ's stock price and dividend history are as follows: Year Beginning-of-Year Price 2019 2020 2021 2022 $ 72 92 62 72 Dividend Paid at Year-End $4 An Investor buys three shares of XYZ at the beginning of 2019, buys another two shares at the beginning of 2020, sells one share at the beginning of 2021, and sells all four remaining shares at the beginning of 2022. Required: 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.) Answer is complete but not entirely correct. 9.22% 5.45% 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, 2019, to January 1, 2022. If your calculator cannot calculate IRR, you will have to use trial and error or a spreadsheet program.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.) Answer is complete and correct.
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
Raghubhai
Transcribed Image Text:XYZ's stock price and dividend history are as follows:
Year Beginning-of-Year Price
2019
2820
2021
2822
$ 72
92
62
72
An Investor buys three shares of XYZ at the beginning of 2019, buys another two shares at the beginning of 2020, sells one share at
the beginning of 2021, and sells all four remaining shares at the beginning of 2022.
Dividend Paid at Year-End
4
4
Required:
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.)
Answer is complete but not entirely correct.
Arithmetic average rate of return
Geometric average rate of return
9.22 %
5.45 %
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, 2019, to January 1, 2022. If your calculator cannot calculate IRR, you will have to use trial and error or a
spreadsheet program.) (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.)
Dollar-weighted rate of return
Answer is complete and correct.
(0.2202)
%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education