A pension fund that begins with $500,000 earns 15% the first year and 10% the second year.At the beginning of the second year,the sponsor contributes another $300,000.The dollar-weighted and time-weighted rates of return,respectively,were

Question

Quizplus · Accepted Answer

The time-weighted rate of return is calculated by finding the geometric mean of the returns for each period, which is 12.5%. The dollar-weighted rate of return considers the timing and amount of cash flows, resulting in 12.1%.

A Pension Fund That Begins with $500,000 Earns 15% the First