An investor opened an account by purchasing 1000 shares of stock $42 per share. One year later, these shares were trading at $55/share, and the investor purchased 1000 more shares. At the end of the second year, the shares were trading at $54. The time weighted and money wieghted rates of return on the account were: time weighted money weighted A 13.4% 7.73% B 16.4% 5.26% C. 16.4% 7.73% D 13.4% 5.26% Please help, i cant think around this

for money weighted, CF0 = - 42,000 CF1 = -55000 CF2 = 108,000 Calc IRR = 7.73% for time weighted, first yr return = (55-42)/42 = 0.309 second yr return = (54-55)/55 = -0.018 Calc geometric mean Sqrt(1+TW)= (1.31)(0.98) time weighted ~ 13.3% A) hope this helps.

Yes it does. Am very thankful

Sqrt (1+TW) = 1.31 * 0.98 Sqrt (1+TW) = 1.2838 1+TW = (1.2838)^2 1+ TW = 1.648 TW = 0.648. Where did ya get 13.3 % ?

I think sabaruch made a small error with the formula. It should be: (1+TW)^2 = 1.31 * 0.98

Cavil to find SQRT you need to x^0.5 as instead of x^2 - finger troubles

Because there was a slight mistake in the aboveā¦ (1+TW)^2 = (1+0.309)(1-0.018) (1+TW) = SQRT[(1.31)(0.98)] TW = SQRT[(1.31)(0.98)] -1 TW = ~1.133 - 1 = ~13.3%