Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Problem 24-6 (Algo)
XYZ's stock price and dividend history are as follows:
Beginning of
Year Price
$ 110
Year
2020
2021
2022
2023
120
100
110
Dividend Paid
at Year-End
$4
An investor buys three shares of XYZ at the beginning of 2020, buys another two shares at the beginning of 2021, sells one share at
the beginning of 2022, and sells all four remaining shares at the beginning of 2023.
Required:
a. What are the arithmetic and geometric average time weighted rates of return for the investor?
Note: Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations.
b. What is the dollar-weighted rate of return? (Hint Carefully prepare a chart of cash flows for the four dates corresponding to the
turns of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate internal rate of return, you will have to
use trial and error.)
Note: Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.
a.Arithmetic average rate of return
a. Geometric average rate of return
b. Dollar-weighted rate of return
%
%
%
4
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Transcribed Image Text:Problem 24-6 (Algo) XYZ's stock price and dividend history are as follows: Beginning of Year Price $ 110 Year 2020 2021 2022 2023 120 100 110 Dividend Paid at Year-End $4 An investor buys three shares of XYZ at the beginning of 2020, buys another two shares at the beginning of 2021, sells one share at the beginning of 2022, and sells all four remaining shares at the beginning of 2023. Required: a. What are the arithmetic and geometric average time weighted rates of return for the investor? Note: Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations. b. What is the dollar-weighted rate of return? (Hint Carefully prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate internal rate of return, you will have to use trial and error.) Note: Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign. a.Arithmetic average rate of return a. Geometric average rate of return b. Dollar-weighted rate of return % % % 4
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