An analyst gathered the following information about a common stock investment: Stock Purchase 15-jan 06 amount 86 15-jan 07 amount 94 Stock Sale 15-jan 08 amount 212 The stock does not pay a dividend. The time-weighted rates of return on the investment is closest to: What is time weighted rate if return??
geometric mean of holding period returns. [{(1.093) x (1.1277) } ^ 1/2] - 1 = 11.02 %
[(94/86)*(106/94)]^.5-1 = 11% TW is the geometric return.
find the holding period retuns and then calculate the geometric mean of those HPRs.
not getting the correct answer…can someone pls - put in the numbers… Also, soxboys 21, can you explain ur short-cut way !!!
HPY of 1 = 12/86 = 13.95 HPY 2 = 24/188 = 12.7 return 13.35
First Yr 1 stock for 86. After 1 yr (2nd yr) its value was 94 so this holding period return is 9.3 % also, 2nd yr there are total 2 shares of 94 x 2 = $188 these were sold after 1 yr for 212 so (212 - 188) / 188 = 12.77% holding pd return for 2nd yr now [{ (1 + hpr of yr 1) x (1 + hpr of yr 2) } ^ 1/2] - 1 is the answer.
Sox…thats a good shortcut. your algebra teacher can be proud of you 
what’s the answer for this one?
correct answer is 11.02%
I also like the shortcut solution given by soxboys21. Thanks.
okay I see the mistake. i did 12/86 that is actually 8/86 god i hope i am not going blind.
SOXBOYS21 - THANKS - for new METHOD !!
yeah sox is great.