Schweser book 5 page 115 question 14

CFA Level III Portfolio Management
#1

Guys I totally don’t understand what this question is asking for, so here is the question, can someone explain what’s going on?

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my question-what the eff is this question asking? does Rb represent the return if the money were put in the portfolio at the beginning of the time? if this were the case, shouldn’t the return of Rb>Re, becauese you grow that money you put in during this period. Instead of the return of Re, which is you putting the money into the portfolio at the end of the period and your money doens’t get a chance to grow? am i understanding this question wrong?

#2

Your question is incomplete and we’re left to wonder which part is same . You have not given any values at all , so I’m guessing. The end value of the portfolio is same , the value of the portfolio that earns a return is larger if the cash flow came at the beginning, so Rb < Re.

#3

i think there’s something wrong with this question, i literally copied every single word from the schweser book and posted it here…

#4

. . . thus violating Schweser’s copyright.

#5

rb = vt - (v0 + cf) / (v0+cf)

re = vt - (vo+cf) / v0

so re > rb because both numerators are the same, but denominator on re is smaller.