Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:XYZ stock price and dividend history are as follows:
Year
2018
2019
2020
2021
Beginning-of-
Year Price
$ 120
145
115
120
Dividend Paid at
Year-End
$ 3
3
3
3
An investor buys six 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 seven remaining shares at the beginning of 2021.
Required:
a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
X Answer is complete but not entirely correct.
Arithmetic time-weighted average returns
Geometric time-weighted average returns
3.89
%
1.07 X %
Transcribed Image Text:b-1. 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.
(Negative amounts should be indicated by a minus sign.)
X Answer is complete but not entirely correct.
Date
01/01/2018
01/01/2019
01/01/2020
01/01/2021
Cash Flow
$
(720)
(290)
163 X
868 X
b-2. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use
a spreadsheet or trial and error.) (Negative value should be indicated by a minus sign. Round your answer to 4 decimal places.)
X Answer is complete but not entirely correct.
Rate of
return
0.8087%
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