An investor buys three shares of XYZ at the beginning of 2010, buys another one

Question

An investor buys three shares of XYZ at the beginning of 2010, buys another one shares at the beginning of 2011, sells one share at the beginning of 2012, and sells all three remaining shares at the beginning of 2013.

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.)

Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2010, to January 1, 2013. (Negative amounts should be indicated by a minus sign.)

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.)

Explanation / Answer

-2 capital gain+divedend Arthimatic return -0.65% Geometric time weighted return,we divide into 4 periods 2010 to 2011 beginning -97.06% 2011 to 2012 beginning -0.48% 2012 to 2013 beginning 108.79% Geometric return -93.89% Date      Cash Flow 01-01-2010 -306 01-01-2011 -96 01-01-2012 103 01-01-2013 297 Cash flow 1 2 3 4 -306 -96 103 297 IRR -0.199% IRR is dollar weighted return

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