The dollar-weighted rate of return (DWR) measure:
A) compounds all cash flows except the initial portfolio value to determine the terminal value.
B) is equivalent to the IRR measure used in capital budgeting.
C) is an appropriate measure to make comparisons to other portfolios or market indexes.
D) like the Time-Weighted Returns (TWR) are heavily influenced by cash flows subsequent to the initial amount.

Question

Quizplus · Accepted Answer

The dollar-weighted rate of return (DWR) is equivalent to the internal rate of return (IRR) measure used in capital budgeting, as both consider the timing and amount of cash flows to calculate the return on an investment.

The Dollar-Weighted Rate of Return (DWR) Measure