Question

(1 pt) John invests 1700 dollars in a mutual fund on January 1. On February 1, his fund balance is 1810 dollars, and he invests an additional 1180 dollars. On May 1, his fund balance is 2570 dollars, and he withdraws 514 dollars. On August 1, his fund balance is 2376 dollars, and he withdraws another 237.60 dollars. On the following January 1, his fund balance is 2208.40 dollars. What is John's time-weighted rate of return? Answer = percent.

Can use excel as long as answer is correct.

Answer 1

HPR = (final value - initial value)/initial value

John invests 1700 dollars in a mutual fund on January 1. On February 1, his fund balance is 1810 dollars

=> holding period return HPR1 = (1810 - 1700)/1700 = 6.47%

om 1st Feb, he invested $1180. So balance in account = 1180+1810 = $2990

on May 1 balance = $2570

So, HPR2 = (2570 - 2990)/2990 = -14.05%

He withdraws $514 on May1, so new balance = 2570 - 514 = $2056

On August 1, his fund balance is $2376

So, HPR3 = (2376 - 2056)/2056 = 15.56%

He withdraws $237.60 on August 1, so new balance = 2376 - 237.6 = $2138.4

On jan 1, balance = $2208.40

So, HPR4 = (2208.4 - 2138.4)/2138.4 = 3.27%

So, Time weighted return = (1+HPR1)*(1+HPR2)*(1+HPR3)*(1+HPR4) - 1 = 1.0647*0.8595*1.1556*1.0327 - 1 = 9.22%

So, time weighted return = 9.22%