A development finance specialist wants to evaluate annualized return of a certain investment portfolio.

A development finance specialist wants to evaluate annualized return of a certain investment portfolio. The following information is given; Y0: purchase one share of FNB_Namibia for NAD65.40 Y1: purchase another share of FNB_ Namibia for NAD68.12 Y1: received a dividend on the first share of NAD0.75 Y2: purchase another share of FNB-Namibia for NAD75.95 Y2: received a dividend on the second share of NAD0.77 Y3: sell 3 shares for $82.76 per share Where Y=year, calculate the time-weighted rate of return on this portfolio? [5]

Solutions

Expert Solution

To calculate the return on the portfolio we have to calculate the IRR (internal rate of return).

IRR is the rate of return at which NPV is 0, so using NPV formula and equating it with 0 we can calulcate the IRR

Ans. 9.35%

Formula:

Working:

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Compare and contrast different portfolio performance measurements. Analyze and explain the following metrics: - Annualized Return...

Compare and contrast different portfolio performance measurements. Analyze and explain the following metrics: - Annualized Return (APY) - Standard Deviation - Beta - Sharpe Ratio - Alpha or Jensen Ratio - Treynor Ratio

the table below represents the development of a portfolio of investment entered by Golden Joy Investment...

the table below represents the development of a portfolio of investment entered by Golden Joy Investment during the year 2019 name of the firm Number of shares January share price December share price dividend per share declared GT bank 12000 10.00 10.00 0.00 prudential bank 1000 2.80 3.00 1.25 fan milk ltd 5000 2.00 1.50 0.00 unilever brothers 15000 1.00 2.00 0.20 a) As an investment management consultant how would you be able to determine the percentage return on each...

You are to evaluate a portfolio with a gold position of $300,000 and a $500,000 investment...

You are to evaluate a portfolio with a gold position of $300,000 and a $500,000 investment in silver. The daily volatilities of gold and silver are 1.8% and 1.2% respectively, and the correlation between their returns is 0.6. Calculate the 10-day 97.5% VaR for the portfolio? By how much does diversification reduce the VaR?

Diversification in an investment portfolio is a significant concept for creating the highest return for the...

Diversification in an investment portfolio is a significant concept for creating the highest return for the least amount of risk. To create this diversification portfolio managers consider the correlation of investments. Based on your reading, thoroughly explain how correlation is interpreted and how it can help with the creation of a diversified portfolio.

A firm wants to undertake an investment project which costs N$25,000, which it wants to finance...

A firm wants to undertake an investment project which costs N$25,000, which it wants to finance through a bank loan. The project has a 60 percent probability of success. If the project succeeds the firm will make a cash flow of N$75,000 after a year. If it fails the firm will get a cash flow of N$10,000 and will be required to pay the whole amount to the bank. The bank has a required return of 25%. (a) What will...

A firm wants to finance an investment that would produce an annual EBIT of $415,000 by...

A firm wants to finance an investment that would produce an annual EBIT of $415,000 by issuing 850 ten-year zero-coupon bonds (each with $1,000 face value) that will be charged a market interest rate of 8%. Suppose the bonds will be issued on January 1, 2020 and will mature on December 31, 2029. Assume EBIT is constant over time at $415,000 and the tax rate is 35%. Shown below are income statement templates for the years 2020 and 2029. You...

(27) The logical outcome of portfolio investment theory is that the expected rate of return for...

(27) The logical outcome of portfolio investment theory is that the expected rate of return for a stock ( will / will not ) contain a persistent risk premium for company specific factors: (a) it will, as investors must be compensated for bearing investment risk regardless of its source (b) it will not, as equilibrium expected returns should reflect only non-diversifiable stock market risk

Based on the investment portfolio information shown below, what is the portfolio’s expected return? Stock Investment...

Based on the investment portfolio information shown below, what is the portfolio’s expected return? Stock Investment Return X $250,000 13.4% Y $400,000 10.9% Z $350,000 11.7

1. Discuss how return on investment and residual income are used to evaluate investment center performance...

1. Discuss how return on investment and residual income are used to evaluate investment center performance 2. Compare and contrast capital budgets from operating budgets

Process development group wants to evaluate 3 new formulations A, B and C for the Wonderdrug...

Process development group wants to evaluate 3 new formulations A, B and C for the Wonderdrug tablets to see if their dissolution (% of API dissolved in 30 minutes) is comparable or different from each other and from the current (reference) formulation R. Describe the experiments you will conduct to answer that question, how you will analyze the collected data and how your conclusions may look like after the analysis.

Subjects