A pension fund portfolio begins with $500,000 and earns 15% the first year and 10% the second year. At the beginning of the second year, the sponsor contributes another $500,000. What were the time-weighted and dollar-weighted rates of return?

A pension fund portfolio begins with $500,000 and earns 15% the first year and 10% the second year. At the beginning of the second year, the sponsor contributes another $500,000. What were the time-weighted and dollar-weighted rates of return?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

See similar textbooks

Related questions

Q: The projected benefit obligation and plan assets were $80 million and $100 million, respectively, at…

A: Gains or losses cannot not be part of pension expense, unless the total net gain is more than the…

Q: Determine the present value of a financial instrument that pays $18,500 in 10 years if instruments…

A: Present Value: It refers to the real value or worth of any asset or project. It determines the fair…

Q: If 14,000 dollars had been invested in the fictious fund on June 30, 1995, then on June 30, 2005 the…

A: A Compound Annual Growth Rate(CAGR) is the method in which we calculate the total return from an…

Q: What is the present value of a security that will pay the amount shown below in 20 years? Securities…

A: Present value refers to the current valuation for a future sum. Investors determine the present…

Q: A portfolio manager plans to invest 1,000,000 TL in an investment with a 22% return for the first 2…

A: in this we have to calculate effective interest rate of both investment.

Q: You invest $12,650 in a project today. You expect to receive cash flows $3,200, $5,160, $4,288,…

A: Discounted payback period is calculated as number of years required for a project to recover the…

Q: An investment project has annual cash inflows of $4,000, $4,900, $6,100, and $5,300, for the next…

A: Discounted Payback Period = Years before full recovery + (unrecovered cost at the start of the year/…

Q: A company plans to place money in a new venture capital fund that currently returns 10.7% per year,…

A: Effective annual interest rate(EAR) refers to the real rate of return that we earn on our savings or…

Q: Suppose you invest $2000 into a mutual fund that is expected to earn a rate of return of 11%. The…

A: Investment (PV) = $2000 Rate of return (r) = 11%

Q: You are a fixed term interest rate portfolio manager and have been advised that cash inflows for the…

A: Time-weighted rate (TWR) is a method for finding compounded return of an investment divided into…

Q: Amen invested GHC200 in a hedge fund at an annual interest of rate of 15%, if he is expected to…

A: Given information : Initial investment 200 Annual interest rate 15% Expected amount 1220…

Q: Over a 10-year period, the Growth Fund of America had annual returns of 0.02%, 29.8%, 14.84%,…

A: Period = 10 Years Requirement = What is Fixed annual compound rate

Q: A no-load (commission-free) mutual fund has grown at a rate of 11% compounded annually since its…

A: Future Value of Annuity: It represents the future worth of current periodic annuity payments. It is…

Q: The New Fund had average daily assets of $2.2 billion last year. The fund sold $400 million worth of…

A: Turnover ratio is used to measures the efficiency of company to generate revenue with company asset.…

Q: Yamaha Growth Fund has an expense ratio of 1.83%. If you invest $55,000 in this fund, what is the…

A: Expense ratio is the percentage of the fund’s asset which is used for administrative and operating…

Q: GROW fund Charges a front end load of 5%, but has no 12B-1 fee an expense ratio of .25%. Assume the…

A: grow fund has a Front End load fee of 5% And Expense Ratio = 0.25% Rate of Return (before any fees)…

Q: Consider a $10 million fund with 20% incentive fees and 2% management fees that lasts 5 years, earns…

A: Hedge funds are an investment option available for HNIs because they involve complex trading…

Q: If Quail Company invests $50,000 today, it can expect to receive $10,000 at the end of each year for…

A: Introduction: The net present value of a capital asset is a metric that measures whether or not to…

Q: d) If the pension fund you manage expects to have an inflow of $200 million 12 months from now, what…

A: There will be an inflow of $200 million after 12 months from now. There is a risk of the interest…

Q: 2. If $14,000 had been invested in the Fictious Fund on June 30, 1995, then on June 30, 2005 the…

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: Identify the symbols involved if a pharmaceutical company wants to have a liability fund worth $200…

A: Payment made regularly for each period is known as annuity. To calculate the present value of…

Q: Suppose a person has a retirement investment portfolio that consistently earns 5.1% annually. In…

A: Perpetuity is an annuity that continues for an indefinite period. In perpetuity series of cash flows…

Q: The New Fund had average daily assets of $3.9 billion last year. The fund sold $540 million worth of…

A: Turn over ratio is the ratio of total fund sold to average daily assets. It is used to calculate the…

Q: In its first 10 years a mutual fund produced an average annual return of 19.17%. Assume that money…

A: Future value is the total amount of money at a specified point of time.

Q: If P50 was invested at 6% on January 1, year 1, what equal year-end withdrawals(P) could be made…

A: Invested amount (PV) = P 50 Annual interest rate (R) = 6% Number of withdrawals (N) = 10 Annual…

Q: An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $300…

A: Present value can be calculated by using this equation PV =FV(1+r)n where FV =Future value PV…

Q: Since 2007, a particular fund returned 13.2% compounded monthly. How much would a $6000 investment…

A: Investing is a critical component of wealth growth. It enables the investor to fight inflation,…

Q: A portfolio manager plans to invest 1,000,000 TL in an investment with 22% return for the first 2…

A: Cumulative value of investment = Investment * ( 1 + Interest rate1 )Years * ( 1 + Interest rate2…

Q: s first 10 years a mutual fund produced an average annual return of 20.77%. Assume that money…

A: The time period or the number of years (NPER) refers to the time it would require for the investment…

Q: Suppose you makes a $1,000 initial investment today, a $4,000 additional investment at the end of…

A: Money-weighted index is the internal rate of return of the investment made. The IRR is the rate at…

Q: 3. Suppose that this fund has a midyear cash inflow of $ 20 million rather than an outflow. Would…

A: The time weighted rate of return is a tool that helps to compute the annual compound growth rate on…

Q: If $90,000 is invested in a fund on December 31, 2019, and 5 equal annual withdrawals of $23,138.32…

A: solution: Let interest rate earned = i Annual withdrawls = $23,138.32 Amount invested (Present value…

Q: An rrsp is now worth $229,000 after contributions of $3000 at the beginning of every six months for…

A: Worth of rrsp"Future Value" is $229,000 Paymant type is begining of the period. Semi annual…

Q: What is the net present value of an investment thatcosts $75,000 and has a sa lvage value of…

A: Given information : Initial cost $75,000.00 Salvage value $45,000.00 Annual profit…

Q: A pension fund must pay out $1 million next year, $2 million the following year, and then $3 million…

A: A concept that implies the future worth of the money is lower than its current value due to several…

Q: What was its turnover ratio?

A: A turnover ratio represents the quantity of property or liabilities that a business enterprise…

Q: QuantAlpha fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.75%. Assume the rate…

A: Value of investment = Invested amount*(1+r)n *(1-annual charges %)n r is rate of return of fund…

Q: 2. If $14,000 had been invested in the Fictious Fund on June 30, 1995, then on June 30, 2005 the…

A: The present value of an investment refers to the worth of investment (or deposits) in today's term.…

Q: f $14,000 had been invested in the Fictious Fund on June 30, 1995, then on June 30, 2005 the…

A: Compound Interest is calculated by multiplying the initial principal amount by one plus the annual…

Q: The New Fund had average daily assets of $3.2 billion in the past year. The fund sold $500 million…

A: a.Given,Average Daily Assets = $3,200,000,000Fund Sold = $500,000,000a.Given,Average Daily Assets =…

Q: Metaz is planning to invest OMR 3500 every year for the next six years in an investment paying 12…

A: As per company policy it is only possible to solve one question in case of multiple question.

Q: If 14000 had been invested in the fictious fund on June 30,1995 the investment would have been worth…

A: Discounting the future value provides the present value.

Question

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Calculation of time-weighted rates of return

VIEW

Calculation of dollar-weighted rates of return

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Suppose that you initially invested 10,000 in the Stivers mutual fund and 5,000 in the Trippi mutual fund. The value of each investment at the end of each subsequent year is provided in the table: Which of the two mutual funds performed better over this time period?
A pension fund is making an investment of $100,000 today and expects to receive $1,600 at the end of each month for the next five years. At the end of the fifth year, the capital investment of $100,000 will be returned. What is the internal rate of return compounded annually on this investment?
a pension fund is making an investment of $100,000 today and expects to receive $1,600 at the end of each month for the next five years. At the end of the fifth year, the capital investment of $100,000 will be returned. What is the initial rate of return compounded annually on this investment?
A hedge fund with $25 million of assets under management has a standard 2/20 fee structure and earns 14 percent this year. Assume that management fees are paid at the beginning of each year and performance fees are paid at the end of each year. Assume that the fund’s fee structure also contains a high-water mark provision. What is the management fee collected by the fund managers? What is the performance fee collected by the fund managers? What is the investor’s net return?
Suppose an individual invests £25,000 in a load mutual fund. The load fund entails an up-front commission charge of 4 percent of the amount invested and is deducted upfront. In addition, annual fund operating expenses are 0.85 percent, which is charged on the average net asset value invested in the fund. The return on this fund is 6 percent each year paid on the last day of the year. What would be the investor’s return on this fund after one year?
Pension plan assets were $900 million at the beginning of the year and $958 million at the end of the year. At the end of the year, retiree benefits paid by the trustee were $22 million and cash invested in the pension fund was $26 million. What was the percentage rate of return on plan assets?
A pension fund is expected to produce a cash flow of $1,000 at the end of the upcoming year. This cash flow will grow at a rate of 10% for five years and then at the rate of 7% indefinitely. Assume the annual interest rate for pension-related investments is 12%. 1) What is the value of the pension fund?
A closed-end fund starts the year with a net asset value of $12.00. By year-end, NAV equals $12.10. At the beginning of the year, the fund was selling at a 2% premium to NAV. By the end of the year, the fund is selling at a 7% discount to NAV. The fund paid year-end distributions of income and capital gains of $1.50.a. What is the rate of return to an investor in the fund during the year?b. What would have been the rate of return to an investor who held the same securities as the fund manager during the year?
A closed-end fund starts the year with a net asset value of OMR10. By year end, NAV equals OMR10.10. At the beginning of the year, the fund was selling at a 3% premium to NAV. By the end of the year, the fund is selling at a 6% discount to NAV. The fund paid year end distributions of income and capital gains of OMR2.50. What is the rate of return to an investor in the fund during the year?
An equity fund has a front end load of 4 % and special fees of 0.5% annually as well as back-end fees that start at 5 % and fall by 1 % for each full year the investor holds the portfolio until the fifth year. Assuming the rate of return on the fund net of operating expenses is 10 % annually, what will be the value of a K10 000 investment in the equity fund shares if the shares are sold after 1 year, 4 years and 10 years?
A pension fund starts the year with $50million. After 6 months it has appreciated to $60million at which point it pays out pension of $20million. In the second half of the year, the fund appreciates by a further 50% Required; 1. Calculate the annually compounded $ Time weighted rate of return 2. Calculate the annually $ weighted rate of return 3. Suppose that this fund has a midyear cash inflow of $ 20 million rather than an outflow. Would this reduce or increase the time weighted rate of return
Suppose that a $200M VC fund has a management fee of 2.5 percent per year for the first five years, with a reduction of 0.25 percent (25 basis points) in each year thereafter. All fees are paid on committed capital, and the fund has a 10-year life. What are the lifetime fees and investment capital for this fund?