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View Full Version : Arithmetic and geometric mean, dollare-weighted return, cash flows.


fafan
Sep 24, 2009, 06:32 AM
XYZ stock price and dividend history are as follows:

Year Beginning-of-year price Dividend Paid at year-End

2005 $100 $4
2006 $110 $4
2007 $90 $4
2008 $95 $4


An investor buys three shares of XYZ at the beginning of 2005, buys another two shares at the beginning of 2006, sells one share at the beginning of 2007, and sells all four remaining shares at the beginning of 2008.

Requirements1:
What are the arithmetic and geometric average time-weghted rates for return for the investor?

Requrement2:
(a) What is the dollar-wighted rate of return?

(b) Prepare a chart of cash flows for te four dates corresponnding to the turns of the year for January 1, 2005, to January 1, 2008.

Year Cash flow
2005 $_____________
2006 $_____________
2007 $_____________
2008 $______________

morgaine300
Sep 24, 2009, 06:01 PM
Please read the guidelines for posting homework problems:
Ask Me Help Desk - Announcements in Forum : Homework Help (https://www.askmehelpdesk.com/finance-accounting/announcement-font-color-ff0000-u-b-read-first-expectations-homework-help-board-b-u-font.html)

(As a note, I've never heard of a difference between an arithmetic and geometric average. But if someone on here has heard of that, you'll will still get better help if you show your own attempts at the problem first.)