BAO3403 Investment and Portfolio Magement, Semester 1, B3, 2021 Question 2 (9 points) XYZ stock price and dividend history are as below. Year Share price at the Dividend paid at the beginning of the year end of the year ($) ($) 2014 50 2 N 2015 55 3 2016 57 1 2017 2 52 57 2018 3 An investor buys three shares of XYZ at the beginning of 2014, buys another two shares at the beginning of 2015, sells two shares at the beginning of 2016, buys two shares at the beginning of 2017 and sells all remaining shares at the beginning of 2018. Using the above information calculate the following for the investor: a. Arithmetic average return 3 marks b. Geometric average return 1 marks C. Dollar-weighted rate of return 5 marks An investor buys three shares of XYZ a che beginning of 2014, buys another two shares at the beginning of 2015, sells two shares at the beginning of 2016, buys two shares at the beginning of 2017 and sells all remaining shares at the beginning of 2018. Using the above information calculate the following for the investor: a. Arithmetic average return 3 marks b. Geometric average return 1 marks c. Dollar-weighted rate of return 5 marks 2 Formulae Holding period return (HPR): HPR - [PS - PB + CF]/PB where PS Sale price (or PL) Buy price (s you put up) (or PO) CF - Cash flow during holding period Arithmetic average return (AAR) HPRE PB HPRANO 71 T=1 Geometric average return (GAR) HPRO - II (1+HPR) -15-4 T.1 Dollar-weighted return (DWR) Enter the cash flows for each period in a column in an Excel sheet and use the IRR function to calculate the DWR. Example, if you have cash flows in cells A1,A2,A3 and A4, DWR can be calculated as follows: =IRR(A1,A2,A3, A4) Remember to press enter key after the closing bracket. BAO3403 Investment and Portfolio Magement, Semester 1, B3, 2021 Question 2 (9 points) XYZ stock price and dividend history are as below. Year Share price at the Dividend paid at the beginning of the year end of the year ($) ($) 2014 50 2 N 2015 55 3 2016 57 1 2017 2 52 57 2018 3 An investor buys three shares of XYZ at the beginning of 2014, buys another two shares at the beginning of 2015, sells two shares at the beginning of 2016, buys two shares at the beginning of 2017 and sells all remaining shares at the beginning of 2018. Using the above information calculate the following for the investor: a. Arithmetic average return 3 marks b. Geometric average return 1 marks C. Dollar-weighted rate of return 5 marks An investor buys three shares of XYZ a che beginning of 2014, buys another two shares at the beginning of 2015, sells two shares at the beginning of 2016, buys two shares at the beginning of 2017 and sells all remaining shares at the beginning of 2018. Using the above information calculate the following for the investor: a. Arithmetic average return 3 marks b. Geometric average return 1 marks c. Dollar-weighted rate of return 5 marks 2 Formulae Holding period return (HPR): HPR - [PS - PB + CF]/PB where PS Sale price (or PL) Buy price (s you put up) (or PO) CF - Cash flow during holding period Arithmetic average return (AAR) HPRE PB HPRANO 71 T=1 Geometric average return (GAR) HPRO - II (1+HPR) -15-4 T.1 Dollar-weighted return (DWR) Enter the cash flows for each period in a column in an Excel sheet and use the IRR function to calculate the DWR. Example, if you have cash flows in cells A1,A2,A3 and A4, DWR can be calculated as follows: =IRR(A1,A2,A3, A4) Remember to press enter key after the closing bracket