Question

In: Finance

John began his investing program with a $5,500 initial investment. The table below recaps his returns...

John began his investing program with a $5,500 initial investment. The table below recaps his returns each year as well as the amounts he added to his investment account. What is his dollar-weighted average return?

Time Investment Return
0 $ 5,500 8.5 %
1 $ 2,000 - 5.0 %
2 $ 2,600 4.5 %
3 $ 3,000 9.0 %
4 $ 900 - 2.5 %

A-1.8 percent

B-1.5 percent

C-2.6 percent

D-2.0 percent

E-2.2 percent

Solutions

Expert Solution

Time Investment Cummulative Investment Return $ Return
0 5,500                5,500.00 8.50%       467.50
1 2,000                7,967.50 -5.00% -     398.38
2 2,600              10,169.13 4.50%       457.61
3 3,000              13,626.74 9.00%    1,226.41
4 900              15,753.14 -2.50% -     393.83
             53,016.50    1,359.31

dollar-weighted average return = 1359.31 / 53016.50 = 2.56% ~2.6%


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