In: Finance
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
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%