[Financial Mathematics] Jason\'s trust fund has a value of 100,000 on January 1s
ID: 2726183 • Letter: #
Question
[Financial Mathematics] Jason's trust fund has a value of 100,000 on January 1st, 2014. On April 1st, 2014 10,000 is withdrawn from the fund, and immediately after this withdrawal the fund has a value of 95,000. On January 1st, 2015 the fund value is 115,000. a) find the time-weighted rate of investment return for Jason's fund assuming simple interest. b) Find the dollar-weighted annual rate of investment return for Jason's fund assuming simple interest. c) Find the rate of return for Jason's fund using simple interest, and assuming a uniform distribution throghout the year of all deposits and withdrawals. [Financial Mathematics] Jason's trust fund has a value of 100,000 on January 1st, 2014. On April 1st, 2014 10,000 is withdrawn from the fund, and immediately after this withdrawal the fund has a value of 95,000. On January 1st, 2015 the fund value is 115,000. a) find the time-weighted rate of investment return for Jason's fund assuming simple interest. b) Find the dollar-weighted annual rate of investment return for Jason's fund assuming simple interest. c) Find the rate of return for Jason's fund using simple interest, and assuming a uniform distribution throghout the year of all deposits and withdrawals. a) find the time-weighted rate of investment return for Jason's fund assuming simple interest. b) Find the dollar-weighted annual rate of investment return for Jason's fund assuming simple interest. c) Find the rate of return for Jason's fund using simple interest, and assuming a uniform distribution throghout the year of all deposits and withdrawals.Explanation / Answer
Answer A 1st Jan'14 Fund Value MV0 100000 1st Apr'14 withdrawn 10000 1st Apr'14 Balance Value 95000 1st Jan'15 Fund Value MV1 115000 Interest Inflow 25000 HPR = ((MV1-MV0+D1-CF1)/MV0) Period 1 (Jan-mar) HPR=((95000-100000+10000)/100000) Period 1 (Apr-Jan) HPR=((115000-95000)/95000) =(1+.05)*(1+.21)-1 0.2705 Answer A or 27.05% Answer B Opening Balance 100000 Closing Balance 115000 Net Change inBalance 15000 Add withdrawl 10000 First Base 25000 Opening Balance 100000 withdrawl 10000*(9/12) 7500 Balace Secon Base 92500 First Base/Second Base =(25000/92500) Answer B 27.03% Answer 3 Period 1 (Jan-mar) =((100000-95000)/100000) 0.05 Period 2 (Apr-Dec) =((115000-95000)/95000) 0.210526316 26.05%
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