Tom decides to begin investing some portion of his annual bonus,beginning this year with $6,000.In the first year he earns an 8 percent return and adds $3,000 to his investment.In the second his portfolio loses 4 percent but,sticking to his plan,he adds $1,000 to his portfolio.In this year his portfolio returns 2 percent.What is Tom's dollar-weighted average return on his investments?
A) 0.34 percent
B) 1.20 percent
C) 1.54 percent
D) 2.23 percent
E) 2.58 percent

Question

Quizplus · Accepted Answer

Using the Cash Flow worksheet in a financial calculator, the cash flows to be entered are:
CF0 = -6000
CF1 = -3000
CF2 = -1000
CF3 = ((((6000 × 1.08) + 3000) × 0.96) + 1000) × (1.02) = $10,302.82
Solve for IRR = 1.20 percent

Tom Decides to Begin Investing Some Portion of His Annual