Question

QUESTION 20

1. Carrie, after selling all of her shares of DD Company, decided to transact in a mutual fund in January 1, 2010. She listed the fund’s returns over a three-year period as shown below:

	Year
	1	2	3
New Investment at the Beginning of the Year	$5000	$1000	$500
Investment Return for the Year	–3%	10%	–2%
Withdrawal by the Investor at the End of the Year	$0	–$200	–$100

2. Based on these data, the money-weighted return for the investor is closest to:

	a.	1.71%
	b.	2.05%
	c.	1.56%

Answer 1

The formula for Money-Weighted return is;

Where MV(T) = Ending Market Value

MV(0) = Initial Investment

r(T) = IRR for time T ..... [ This is to be calculated ]

N(T) = Net Cash flow for the "t" th year

So, As we can see for 1.71% result has come closest to 6500.3 so answer will be .......... a) 1.71%

Hope it helps. If any doubt ask in the comment section. :-)