Can you help with some Dollar-weighted compoundin annual rate of return/IRR questions? I stuck on a few. They are really straight forward, I think.

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Can you help with some Dollar-weighted compoundin annual rate of return/IRR questions? I stuck on a few. They are really straight forward, I think.

Answered Same DayDec 21, 2021

Answer To: Can you help with some Dollar-weighted compoundin annual rate of return/IRR questions? I stuck on a...

Robert answered on Dec 21 2021
115 Votes
Initial price: $10..00

Year 1
Ending value of portfolio: $10.50
Distribution: $0.30
Market return: 1
2%

Year 2
Ending value of portfolio: $12.00
Distribution: $1.00
Market return: 17%

Year 3
Ending value of portfolio: $11.25
Distribution: $0.50
Market return: 2%

Year 4
Ending value of portfolio: $12.50
Distribution: $1.00
Market return: -3%

Year 5
Ending value of portfolio: $14.00
Distribution: $1.00
Market return: 14%

1. For the entire 5 years, what was the dollar weighted compound annual rate of
return?

Solution:

Year
Opening
Value
Ending
Value Distribution
dollar weighted
compound annual rate of
return
1 10 10.5 0.3 8.00%
2 10.5 12 1 23.81%
3 12 11.25 0.5 -2.08%
4 11.25 12.5 1 20.00%
5 12.5 14 1 20.00%

2. If 100 shares @$1000 are bought at the beginning of year 1, how much did the
investor have at the end of year 5, assuming all cash dividends were reinvested in
the fund at the year-end values? Based on these beginning and end values, what
was the annual rate of return?
Solution:
Year...
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