Question

Let A be the balance in a fund on January 1, 2018, B be the balance in the fund on September 30, 2018, and C be the balance in the fund on December 31, 2018. a) If there are no deposits or withdrawals during 2018, show that the dollar-weighted rate of return and the time-weighted rate of return for the fund during 2018 are both equal to (C-A)/A. b) If there was a single deposit of Wimmediately after the September 30, 2018 balance of B was determined, find expressions for the time-weighted rate of return and the dollar-weighted rate of return for the portfolio during 2018 (assume simple interest for periods less than one year).

Answer 1

ANSWER-

Calculating dollar - weighted investment returns to calculate a one - year dollar - weighted investment return, you need to know the - change in the account balance over the year, the net total deposits and withdrawals in the account, and when those deposits or withdrawals were made. You'll then come up with two numbers. To find the first, take the - change in the balance, subtract deposits to the account, and then add back withdrawals from the account and save the result. For the second number, start with the beginning balance. Then take each - contribution during the year and multiply it by the fraction of a year remaining before year end. For instance, for a contribution made on February 1, you'd multiply the deposit amount by 11/12, because there are 11 months left in the year. Fora withdrawal on December 1, you'd multiply the amount by 1/12.

For each deposit, add the resulting amount to the beginning balance, and for each withdrawal, subtract that amount. | Once you have both numbers, divide the first by the second. That will give you the dollar weighted investment return, which you can then multiply by 100 to give you a return in percentage.

© Time weighted water tellum formula =_ O Trope = [(1406) X(1496, 2) ... (1+y where's total deletum for Sub-Period tin Vo Vi= the feell fair value o Portfolio, inclueling Ceesha and accrued income at the end of the Period Vo = the full fair value of the Portfolio, including Cash and accrued income, at the beginning of the period. ca1 York - ((1+ C-A )x(IHCA Jx... (1+ XmJ1 161 is there was a single deposit of a immediately offer the seplemlor Cintryt rate is 2%.8m)