Question
Suppose the rates of (realized) return were 80% in the 1 st year, -50% in the 2 nd year, 20% in the 3rd year. (i)
Suppose the rates of (realized) return were 80% in the 1st year, -50% in the 2nd year, 20% in the 3rd year.
(i) ) If you had invested at the beginning of the 1st year $1,000, how much would you have had at the end of the 3rd year?
What would have been the annual rate of return (i.e., the time-weighted average rate of return) over the three-year period? Please show your calculation.
(ii) If you had invested at the beginning of 1st year $1,000, another $1,000 at the beginning of the second year, and another $1,000 at the beginning of the 3rd year, how much would you have had at the end of the 3rd year?
What would have been the annual rate of return (i.e., the dollar-weighted average rate of return) over the three-year span? Please show your calculation.
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