Jim began his investing program with a $4,000 initial investment.The table below recaps his returns each year as well as the amounts he added to his investment account.What is his dollar-weighted average return?
A)1.6 percent
B)2.2 percent
C)2.6 percent
D)3.2 percent
E)3.6 percent

Question

Jim began his investing program with a $4,000 initial investment.The table below recaps his returns each year as well as the amounts he added to his investment account.What is his dollar-weighted average return? 
A)1.6 percent 
B)2.2 percent 
C)2.6 percent 
D)3.2 percent 
E)3.6 percent

Quizplus · Accepted Answer

Using the CashFlow worksheet in a financial calculator, the cashflows to be entered are:CF0 = -4000CF1 = -2800CF2 = -900CF3 = -1600CF4 = -2100CF5 = -2400CF6 = 15246.78 (see calculations below)Solve for IRR = 2.6%4000 * (1.10) = 4400(4400 + 2800) * (.95) = 6840(6840 + 900) * (1.02) = 7894.80(7894.80 + 1600) * (1.08) = 10254.38(10254.38 + 2100) * (.97) = 11983.75(11983.75 + 2400) * (1.06) = 15246.78

Jim Began His Investing Program with a $4,000 Initial Investment