Question

6-) Calculate the time-weighted rate of return for the following portfolio:

Date(t)      Account Value      Contributions/Withdrawals         Dividends

    05-Jan        $53 million                                                             2.2 million

31-Mar        $56.4 million         4 million contribution                     3.1 million

15-Apr         $65.7 million        3 million withdrawal

31-May       $59.3 million                                                                                

1. 13.25%
2. 11.89%
3. 9.48%
4. 12.55%
5. 9.15%

PLEASE SHOW YOUR WORK

Answer 1

Answer -

c. 9.48%

Explanation as -

here,

where, R = Return

As per given above,

R1 = [$56.4 million - ($53 million + $2.2 million)] / ($53 million + $2.2 million)

= 2.17%

R2 = [$65.7 million - ($56.4 million + $4 million + $3.1 million)] / ($56.4 million + $4 million + $3.1 million)

= 3.46%

R3 = [$59.3 million - ($65.7 million - $3 million)] / ($65.7 million - $3 million)

= (- 5.42%)

Hence,

TimeWeighted Rateof Return = |(1+R1)*(1+R2)*(1+R3)*(1+R4)]-1

Time Weighted Rate of Return = [(1 + 2.17%) * (1 + 3.46%)* (1 - 5.42%)] - 1

=