Question

An investor invested RM100 in a fund on Jan 1998 and another RM100 on Jan 1999....

An investor invested RM100 in a fund on Jan 1998 and another RM100 on Jan 1999. The following gives the price of a unit in the fund on Jan 1st:

               Year   Unit Price

               1998   100

               1999   125

               2000   135

Calculate time-weighted rate of return.

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Answer #1
Year Unit value Amount invested Units Purchased = amount invested/unit price total units available = previous units+new units
1998 100 100 1 1
1999 125 100 0.8 1.8
2000 135
return in 1998-1999 (Units price*no of units)/(purchase price)-1 (1*125)/(100) -1 25%
return in 1999-2000 (Units price*no of units)/purchase price (1.8*135)/(125+100) -1 8.00%
weighted average return (1+ Year 1 rate of return)*(1+year 2 rate of return)-1 (1.25)*1.08)-1 35%
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