21. Given the cash flows below, answer the following question (provide your answer and show work in your uploaded document) (maximum points: 3.33)
Date Cash Flow Balance
7/1 Begin 2,150
7/31 ------ 2,280
8/1 $180 2,460
8/31 ------ 2,561
9/1 $100 2,661
9/30 End 2,500
Calculate the average monthly percent rate of return using the time-weighted method over the three months provided here round your answer to 3 decimals in the form 0.000) Show your work in the uploaded document
Given the cash flows below, answer the following question (provide your answer and show your work in your uploaded document) (maximum points: 3.33)
Date Cash Flow Balance
7/1 Begin 2,150
7/31 ------ 2,280
8/1 $180 2,460
8/31 ------ 2,561
9/1 $100 2,661
9/30 End 2,500
Calculate the average monthly rate of return using the money (dollar)-weighted method over the three months provided here (round your answer to 3 decimals in the form 0.000) Show your work in the uploaded document:
Also, Describe under what circumstances the time-weighted method is preferred to the money (dollar)-weighted method
Solution :
(a)
Average monthly percent rate of return using the time-weighted method
(b)
Average monthly rate of return using the money (dollar)-weighted method
Date | balances | money weighted return | |
7/1 | 2150 | ||
7/31 | 2280 | =2150/2280=0.943 | |
8/1 | 2460 | ||
8/31 | 2561 | =2460/2561=0.96 | |
9/1 | 2661 | ||
9/30 | 2500 | =2661/2500=1.064 | |
Average monthly retrun for 3 months is = ( 0.943+0.960+1.064 )/3 | |||
= 0.989 |
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