n investor places $10,000 into a fund on Jan 1, 2024. On Jan 1, 2025 the fund has risen to $12,000 and the investor removes $1,000. On Jan 1, 2026 the fund has fallen to $7,000 and the investor removes $1,000. On Jan 1, 2027 the fund has risen to $10,000 and the investor puts in $1,000. On Jan 1, 2028 the value of the fund is $14,000. a) Calculate the Time-Weighted Rate of Return for this fund as an annual effective rate. b) Calculate the Dollar-Weighted Rate of Return for this fund as an annual effective rate. c) Explain why the values in a) and b) are different.
n investor places $10,000 into a fund on Jan 1, 2024. On Jan 1, 2025 the fund has risen to $12,000 and the investor removes $1,000. On Jan 1, 2026 the fund has fallen to $7,000 and the investor removes $1,000. On Jan 1, 2027 the fund has risen to $10,000 and the investor puts in $1,000. On Jan 1, 2028 the value of the fund is $14,000. a) Calculate the Time-Weighted Rate of Return for this fund as an annual effective rate. b) Calculate the Dollar-Weighted Rate of Return for this fund as an annual effective rate. c) Explain why the values in a) and b) are different.
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter2: Descriptive Statistics
Section: Chapter Questions
Problem 17P: Suppose that you initially invested 10,000 in the Stivers mutual fund and 5,000 in the Trippi mutual...
Related questions
Question
An investor places $10,000 into a fund on Jan 1, 2024. On Jan 1, 2025 the fund has
risen to $12,000 and the investor removes $1,000. On Jan 1, 2026 the fund has fallen to
$7,000 and the investor removes $1,000. On Jan 1, 2027 the fund has risen to $10,000
and the investor puts in $1,000. On Jan 1, 2028 the value of the fund is $14,000.
a) Calculate the Time-WeightedRate of Return for this fund as an annual effective
rate.
b) Calculate the Dollar-Weighted Rate of Return for this fund as an annual effective
rate.
c) Explain why the values in a) and b) are different.
risen to $12,000 and the investor removes $1,000. On Jan 1, 2026 the fund has fallen to
$7,000 and the investor removes $1,000. On Jan 1, 2027 the fund has risen to $10,000
and the investor puts in $1,000. On Jan 1, 2028 the value of the fund is $14,000.
a) Calculate the Time-Weighted
rate.
b) Calculate the Dollar-Weighted Rate of Return for this fund as an annual effective
rate.
c) Explain why the values in a) and b) are different.
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 4 images
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.Recommended textbooks for you
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning