XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End...

XYZ stock price and dividend history are as follows:

Year	Beginning-of-Year Price	Dividend Paid at Year-End
2010	$ 124	$ 4
2011	$ 135	$ 4
2012	$ 115	$ 4
2013	$ 120	$ 4

An investor buys six shares of XYZ at the beginning of 2010, buys another two shares at the beginning of 2011, sells one share at the beginning of 2012, and sells all seven remaining shares at the beginning of 2013.

What is the arithmetic average time-weighted rates of return for the investor? (Do not round intermediate

calculations. Enter your answer as a decimal number rounded to four decimal places)

Arithmetic average time-weighted rates of return?

Expert Solution

Answer : 2.69

Calculation :

Arithmetic average return = Sum of returns/ number of years

Yearly Return = {(capital gains + dividend)/price}*100

Return from 2010-2011 = {(135 - 124) + 4} /124 *100 = 12.10%

Return from 2011-2012 = {(115 - 135) + 4} /135 *100 = -11.85%

Return from 2012-2013 = {(120 - 115) + 4} /115 *100 = 7.83%%

Arithmetic mean = (12.10% -11.85% +7.83%)/3 = 8.08%/3 = 2.69%

jeff jeffy answered 2 years ago

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XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End...

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