Start with $15 million Suppose that you open an account by investing $10M. At beginning of...
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Start with $15 million Suppose that you open an account by investing $10M. At beginning of each of the next two years, you deposit $5M and $8M and in third year you withdrawal $10M from the account and then you liquidate the account at the total four-year period. Suppose that the yearly returns in this account, beginning in year 1, are as follows: 4 percent, 10 percent, -5 percent, 5 percent. What was your actual dollar-weighted average return for the four-year investment period? Year Net inflows or outflows ($ million) HPR Arithmetric average return Geometric average return Geometric average return 1 2 3 4 5 15 8 6 -5 10 10% 12% -8% 16% 0 15% 9.00% 8.60% 8.62% 8.22% 8.62% 8.22% Dollar weighted return Assets under management at start of year ($ million) Investment profit during year ($ million) Net flows at the end of year ($ million) Assets under management at end of year ($ million) Net cash flow ($ million) Dollar weighted return (IRR) 1 2 3 4 5 Time 0 1 2 5 8.26% 7.08% Month Net inflows PR After you find all correct answers, please copy and paste the extra example highlighted in red and double-check whether all answers change to new ones in red 10 1 2 3 4 5 8 5 -12 12 0 12.0% 9.0% -8.0% 12.0% 18.0% Start with $15 million Suppose that you open an account by investing $10M. At beginning of each of the next two years, you deposit $5M and $8M and in third year you withdrawal $10M from the account and then you liquidate the account at the total four-year period. Suppose that the yearly returns in this account, beginning in year 1, are as follows: 4 percent, 10 percent, -5 percent, 5 percent. What was your actual dollar-weighted average return for the four-year investment period? Year Net inflows or outflows ($ million) HPR Arithmetric average return Geometric average return Geometric average return 1 2 3 4 5 15 8 6 -5 10 10% 12% -8% 16% 0 15% 9.00% 8.60% 8.62% 8.22% 8.62% 8.22% Dollar weighted return Assets under management at start of year ($ million) Investment profit during year ($ million) Net flows at the end of year ($ million) Assets under management at end of year ($ million) Net cash flow ($ million) Dollar weighted return (IRR) 1 2 3 4 5 Time 0 1 2 5 8.26% 7.08% Month Net inflows PR After you find all correct answers, please copy and paste the extra example highlighted in red and double-check whether all answers change to new ones in red 10 1 2 3 4 5 8 5 -12 12 0 12.0% 9.0% -8.0% 12.0% 18.0%
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Related Book For
Contemporary Business Mathematics with Canadian Applications
ISBN: 978-0134141084
11th edition
Authors: S. A. Hummelbrunner, Kelly Halliday, Ali R. Hassanlou, K. Suzanne Coombs
Posted Date:
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