R7: Money Weighted Rate of Return (MWRR) Problem

CFA Level I Quant
#1

Screen Shot 2020-08-24 at 11.08.51 pm

Hi does anyone know to do this questions? using calculator as well?

I got 1258 + 4377.60 + 43200 / (1+r)^3

then ∛(1+r)^3 = ∛48836.16

which gave me r=35.55 which is no where near the answer??

Thanks

#2

I have no idea what you’re doing here.

Where did you get the numbers 1,258 and 4,377.6?

What return measures are you considering?

#3

I did --> 1000 (1.15)(1.14)(0.96) =1258 and 4000 (1.14)(0.96) and 45000 (0.96)

then divided by (1+r)^3 to discount it back to T0

any ideas?

#4

Using the BAII CF worksheet

CF0=-1,000 C01=-4,000 F01 = 1 C02=-45,000 F02=1 C03= 48,836.16

2nd QUIT IRR CPT -2.083696799%

#5

Legend! thanks

#6

This is more of an accumulation problem rather than discounting back to time 0.

48,836.16 = {1,000(1 + r)^3 + 4,000(1+r)^2+ 45,000(1+r)}

And since the deposits add up to $50,000, you know r has to be negative!

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