I have a question about this example: My answer differed from the answer in the book and I realized that I have a problem in HPR2. Similar to the example of the time-weighted rate of return, I understand HPR2 beginning as the total price of 2 stocks bought in t=0 and t=1. I guess the first stock bought in t=0 was $40 and increased to $50 in t=1 (because you bought another share of the same stock for $50, which means the stock had increased to $50). So in total, the beginning of t=2 is $100.

So can you help me understand why I am wrong?

An investor buys a share of stock for $40 at time t = 0, buys another share of the

same stock for $50 at t = 1, and sells both shares for $60 each at t = 2. The stock

paid a dividend of $1 per share at t = 1 and t = 2. The time-weighted rate of

return on the investment for the period is closest to:

A. 24.7%.

B. 25.7%.

C. 26.8%.

The book answer: B

This is my answer: A