Question

Suzanne and Kerry entered into a financial agreement. On January 1, 2014, Suzanne gave $12000 to Kerry.
On April 1, 2014, Kerry repaid $4000 to Suzanne.
On July 1, 2014, Kerry repaid $4800 to Suzanne, and Suzanne immediately place half of this payment into an account at Harlow Savings and Loan which earns at effective monthly compound interest rate of 0.5%
Finally, on January 1, 2015, Kerry gave Suzanne $4000 to completely repay the loan. At the same time,Suzanne closed her account at Harlow Savings and Loan and withdrew the money in the account.
What is Suzanne’s dollar-weighted rate of return in this financial agreement, assuming simple interest for the rate of return? (Round your answer to four places after the decimal)
3
Answer =    ____________%

Answer 1

Calculation of return:

Particulars	Calculation	Receipt / (Payment)
1st January 2014	Total payment	(12,000 $)
1st April 2014		4,000 $
1st July 2014	4,800 received and paid 2,400 to bank as investment, so the net figure shall be 2,400	2,400 $
1st January 2015	Money paid by kerry = 4,000 $ Money received from bank = 2,472 (Working below) = 4,000 +2,472 = 6,472 $	6,472 $
	Total receipt	12,872 $

Interest portion= 12,872 - 12,000 = 872$

Time = 1 year

Rate of return = 872 / amount invested (12,000) x 100 = 7.27%Per annum

Working :

Money received from bank on 1st January 2015:

=2,400 x 0.5%p.m x 6 months = 72

= 2,400+72 = 2,472

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