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An investor buys three shares of XYZ at the beginning of 2010, buys another two shares at the beginning of 2011, sells one share at
An investor buys three shares of XYZ at the beginning of 2010, buys another two shares at the beginning of 2011, sells one share at the beginning of 2012, and sells all four remaining shares at the beginning of 2013.
a) What are the arithmetic and geometric average time-weighted rates of return for the
investor?
b) What is the dollar-weighted rate of return?
( Hint: Carefully 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.
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