Question
Arthur buys $2,500 worth of stock. Six months later, the value of the stock has risen to $2,700 and Arthur buys another $1,000 worth of
Arthur buys $2,500 worth of stock. Six months later, the value of the stock has risen to $2,700 and Arthur buys another $1,000 worth of stock. After another eight months, Arthur's holdings are worth $3,000 and he sells off $800 of them. Ten months later, Arthur finds that his stock has a value of $2,600.
(a) Compute the annual time-weighted yield rate of the stock over the two-year period. (Round your answer to two decimal places.
_______%
(b)Compute the annual dollar-weighted yield for Arthur over the two-year period. (Round your answer to two decimal places.)
_______ %
(c) Should the answer in part (a) or part (b) be larger? Why?
The time-weighted yield should be larger because this proves that withdrawals and deposits were timed well.
Or
The dollar-weighted yield should be larger because this proves that withdrawals and deposits were timed well.
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