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Suppose the rates of ( realized ) return were 1 0 0 % in the 1 st year, - 5 0 % in the 2
Suppose the rates of realized return were in the st year, in the nd year, in the rd year.
i If you had invested $ at the beginning of st year, invested $ at the beginning of the second year encouraged by the performance in the st year, and withdrawn $ at the beginning of the rd year discouraged by the performance in the nd year, how much would you have had at the end of the rd year?
What would have been the annual rate of return on your invested money ie the dollarweighted average rate of return over the threeyear span? Please show your equation and calculation.
ii If you had invested $ at the beginning of st year, invested $ at the beginning of the second year, and invested $ at the beginning of the rd year, how much would you have had at the end of the rd year?
What would have been the annual rate of return on your invested money ie the dollarweighted average rate of return over the threeyear span? Please show your equation and calculation.
iii Comparing i and ii above, which investment strategy between the two above ie marketing timing vs constant dollar amount should you adopt going forward?
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