XYZ stock price and dividend history are as follows:

An investor buys three shares of XYZ at the beginning of 2007, buys another two shares at the beginning of 2008, sells one share at the beginning of 2009, and sells all four remaining shares at the beginning of 2010.
a. What are the arithmetic and geometric average time-weighted rates of return for the investor?
b. What is the dollar-weighted rate of return? (Carefully prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2007, to January 1, 2010. If your calculator cannot calculate internal rate of return, you will have to use trial anderror.)

Transcribed Image Text:

Year 2007 2008 2009 2010 Beginning-of-Year Price $100 120 90 100 Dividend Paid at Year-End $4 4 4 4.