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Example: Fund Value before activity Deposit Date Withdrawal 1/1/99 1000 1020 60 3/1/99 1110 100 1050 12/31/99 The dollar-weig

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To calculate the average capital base, the capital inflows and outflows are given a weight based on the amount of time for which they were there in the system.

Average Capital Base = (1000 * 12/12) + (60 * 10/12) - (100 * x) = 1000 + 50 -100x = $(1050 -100x)

Dollar Weighted Return = Gain/Average Capital Base

Gain = 1050 - (1000 + 60 - 100) = 1050 - 960 =$90

where x is the weight of -$100 based on the time for which it was there.

0.08852 = 90/(1050 - 100x)

1050 - 100x = 90/0.08852 = 1016.72

100x = 33.28

x = 0.3328

Let Y be the number of months after 1/1 when $100 was withdrawn

(12 -Y)/12 = 0.3328

12 - Y = 3.99367

Y = 8.01 = 8 approximately.

Thus, $100 was withdrawn 8 months after 1/1.

Thus, the value of T is 1st September or 9/1

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