XYZ's stock price and dividend history are as follows: Beginning-of- Year Price $ 170 200 150 178 Year 2920 2021 2922 2923 Dividend Paid at Year-End $3 3 3 3 An Investor buys three shares of XYZ at the beginning of 2020, buys another two shares at the beginning of 2021, sells one share at the beginning of 2022, and sells all four remaining shares at the beginning of 2023. Required: a. What are the arithmetic and geometric average time-weighted rates of return for the investor? Note: Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations. b. What is the dollar-weighted rate of return? (Hint Carefully prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate Internal rate of return, you will have to use trial and error.) Note: Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN:9781337117005
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Chapter12: Investing In Stocks And Bonds
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Problem 24-6 (Algo)
XYZ's stock price and dividend history are as follows:
Dividend Paid
Beginning-of-
Year Price
$ 170
at Year-End
Year
2920
2821
2822
2823
288
150
178
$3
3
a. Arithmetic average rate of return
a. Geometric average rate of return
b. Dollar-weighted rate of return
3
3
An Investor buys three shares of XYZ at the beginning of 2020, buys another two shares at the beginning of 2021, sells one share at
the beginning of 2022, and sells all four remaining shares at the beginning of 2023.
Required:
a. What are the arithmetic and geometric average time-weighted rates of return for the investor?
Note: Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations.
b. What is the dollar-weighted rate of return? (Hint: Carefully prepare a chart of cash flows for the four dates corresponding to the turns
of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate Internal rate of return, you will have to use trial
and error.)
Note: Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.
%
%
Transcribed Image Text:Problem 24-6 (Algo) XYZ's stock price and dividend history are as follows: Dividend Paid Beginning-of- Year Price $ 170 at Year-End Year 2920 2821 2822 2823 288 150 178 $3 3 a. Arithmetic average rate of return a. Geometric average rate of return b. Dollar-weighted rate of return 3 3 An Investor buys three shares of XYZ at the beginning of 2020, buys another two shares at the beginning of 2021, sells one share at the beginning of 2022, and sells all four remaining shares at the beginning of 2023. Required: a. What are the arithmetic and geometric average time-weighted rates of return for the investor? Note: Round your year-by-year rates of return and final answers to 2 decimal places. Do not round other calculations. b. What is the dollar-weighted rate of return? (Hint: Carefully prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2020, to January 1, 2023. If your calculator cannot calculate Internal rate of return, you will have to use trial and error.) Note: Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign. % %
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