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You have the following price for a stock for several recent years. Assume that the stock pays no dividends Beginning of year price # shares bought Year 2005 $50 2006 $55 2007 S51 2008 54 or sold 100 bought 50 bought 75 sold 75 sold
a. What is the holding period return for each year?
b. What is the geometric average return for the period?
c. What is the dollar weighted return for the time period?

Respuesta :

Answer:

a.                                                 2005     2006      2007         2008

Holding period return                10%        -7.27%    5.88%        -100

b. Geometric  average return = -100

c. Dollar weighted return= -2.70%

Explanation:

Holding period return = [tex]\frac{income+(end period value - original value)}{original value}[/tex]

                                    =[tex]\frac{o + ( 55 - 50)}{50}[/tex] * 100

                                    = 10%

geometric average return = (( 1+r)*(1+r2)*(1+r3)*(1+r4))^1/4   - 1

dollar weighted return = (initial investment + additions) /  (initial investment -withdrawals)

                                      = ( 5000+ 2750)/(5000-3825-4050)

                                      = 7750/-2875

                                      =

                                           

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