Use the data below for the next two questions. 1-Day Period 126 252 Total Return
ID: 2789633 • Letter: U
Question
Use the data below for the next two questions. 1-Day Period 126 252 Total ReturnlInvestmentReturn Return 4.0% $109.20 | 0.03% 9.20% 15.0%$1,150.00| 0.11% 15.00% 0 Asset Investment $100.00 $0.00 $100.00 ReturnlInvestment 5.0%) $105.00 $1,000.00 $1,105.00 Total $1,259.20 9. Calculate the time weighted return for the entire period (252 days) a) b) c) d) e) 9.50% 13.98% 14.50% 19.00% 19.65% 24.00% 27.97% g) 10. The money weighted return (252 days) is approximately. a) b) c) d) e) 9.50% 13.98% 14.50% 19.00% 19.65% 24.00% 27.97% g)Explanation / Answer
Answer for question no.9:
Time weighted return =(1+return for the first period)*(1+Return for the next period) -1
So, return for the first period =(105-100)/100=5%.
Return for the second period=(1259.2 -1105)/1105=13.9547%
Substituting the values in the formula is (1+.05)*(1+.139547)-1
=19.65%..
Therefore, answer is option e.
Answer for question no.10:
This can be arrived by finding the value of r at which the return is equal to the present value of investments
Value of the portfolio at the end of investment period=addtions during the year(1+r)^holdingperiod/total number of day+Initial investment(1+r)
Subtituting the values
1259.20=1000*(1+r%)^((126)/252)+100*(1+r)
And solving for r using trail and errot method both sides are equal.
Hence, answer is option g.
It is concluded that at r=27.97%, the Return and investment are equal to zero.
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