Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Walt and Cady Longmire were investing in shares of Wyoming Mining Company. The returns for the stocks during 2 0 1 7 , 2 0

Walt and Cady Longmire were investing in shares of Wyoming Mining Company. The returns for the stocks during 2017,2018, and 2019 were 10%,-5%, and 23.5%, respectively. At the beginning of 2017, Walt invested $5,000 in the stocks and he did not make any additional investment in 2018. At the end of 2018, Walt cashed out his entire investment in Wyoming Mining Company.
Meanwhile, his daughter Cady Longmire invested $3,000 in the stocks at the beginning of 2017. She later made no deposit in 2018 but invested an additional $5,000 at the start of 2019. At the end of 2019, Cady cashed out her entire investment in Wyoming Mining Company.
Answer the following:
(i) Calculate and interpret Walts dollar-weighted average return for his 2-year investment in Wyoming Mining Company.
(ii) Compare Walts dollar-weighted average return to the geometric average return (for the 2-year investment period), do your answers make sense? Why or Why not? Did you have any expectation prior to your calculation?
(iii) Calculate and interpret Cadys dollar-weighted average return for her 3-year investment in Wyoming Mining Company.
(iv) Compare Cadys dollar-weighted average return to the geometric average return (for the 3-year investment period), do your answers make sense? Why or Why not? Did you have any expectation prior to your calculation?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Financial Management

Authors: James C. Van Horne

10th Edition

0138596875, 9780138596873

More Books

Students also viewed these Finance questions

Question

16. What makes them unique? (special features of the group)

Answered: 1 week ago