TIP: MWRR on BA II Plus

CFA Level III
#1

Although you are unlikley to see such a calculation on the exam, if you want to calculate MWRR on BA II Plus there is a cheap way.

Example:

Invest 900,000 at day 0

Invest 50, 000 at day 15

Get 1,466,553 on day 3

Use the cash flow worksheet, set CF0 to 900,000

Set CF1 to 0, and its frequency to 14

Set CF2 to 50,000 and its frequency to 1

Set CF3 to 0 and its frequency to 14

Set CF4 to -1,466,553 and its frequency to 1

The resulting MWRR is your daily MWRR, you would wont it for the total period so raise it to the power of 30 in this case. (1+r)^30

When the dates are split out equally like in this case, it would have been easier to just use CF1 and CF2, the result would be a 15 day MWRR, but if you get cashflows that are not even, ie day 7, 12, 19, then the method above will be your choice.

Good luck

#2

this will not work if all the cash flows are inflows.

#3

humm yes, since MWRR would be undefined in that case… if you put them all as + or as -, you clearly cant get a solution…

or did you mean something else?

#4

yes that is what I meant.

and that method does not consider the final value that your portfolio had actually grown too as well.

you are better off doing an approximation using linear interpolation.

#5

Plug and chug

#6

I assumed that CF4 was the final valuation of the portfolio (as in if a full liquidation was done).

LostCFA when you said “Get 1,466,553 on day 3” you meant day 30 right?

If this is the case then there would be a negative amount all the time and this would work.

#7

yeh ment day 30, its an example out of schweser.

just thought i would share it, so far this method has not failed me