The time-weighted rate and dollar-weighted rate of return for a pension fund which is having initia invetsment of $ 500000 and an another investment of $ 500000 in the beginning of second year and is earning 15 % and 10 % in the first and second year respectively. Introduction: Time-weighted rates of return , also known as geometric return, is a return on investment which shows that how much return investor has earned every year over a period of investment. The reason for this name is the equal weight given to each return in the geometric average. Dollar- weighted average return means rate of return of an investment, which takes effect into account the timimg of flows. Its is somewhere different from time-weighted rate of return. Dollar- weighted average return is somewhere similar to IRR .

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Chapter 18, Problem 11CP

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The time-weighted rate and dollar-weighted rate of return for a pension fund which is having initia invetsment of $500000 and an another investment of $500000 in the beginning of second year and is earning 15% and 10% in the first and second year respectively.

Introduction:

Time-weighted rates of return, also known as geometric return, is a return on investment which shows that how much return investor has earned every year over a period of investment. The reason for this name is the equal weight given to each return in the geometric average.

Dollar- weighted average return means rate of return of an investment, which takes effect into account the timimg of flows. Its is somewhere different from time-weighted rate of return. Dollar- weighted average return is somewhere similar to IRR.

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