Question

A portfolio begins on January 1st with an initial balance of $1,000,000. It then has the...

A portfolio begins on January 1st with an initial balance of $1,000,000. It then has the following cash flows:

Date Deposit/Withdrawal Balance following the cash flow

Jan. 1 +1,000,000 1,000,000

Feb. 1 +100,000 1,070,000

Mar. 1 +400,000 1,570,000

What is the total TIME WEIGHTED RETURN for the period ending March 1st?

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Answer #1

Time weighted return = (1 + return between Jan 1 and Feb 1) * (1 + return between Feb 1 and Mar 1) - 1

Time weighted return = (1 + [(Feb 1 Value - Cash Deposit - Jan 1 Value)/Jan 1 Value]) * (1 + [(Mar 1 Value - Cash Deposit - Feb 1 value)/Feb 1 Value]) - 1

Time weighted return = (1 + [(1070000 - 100000 - 1000000)/1000000]) * (1 + [(1570000 - 400000 - 1070000)/1070000]) - 1

Time weighted return = (1 + [-30000/1000000]) * (1 + [100000/1070000]) - 1

Time weighted return = (0.97 * 1.093458) - 1

Time weighted return = 1.0607 - 1

Time weighted return = 6.07%

*Please comment if you face any difficulty and please don't forget to provide positive rating*

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