The average compound return earned per year over a multiyear period when inflows and outflows are considered is called the:
A) total return
B) average capital gains yield
C) dollar-weighted average return.
D) arithmetic average return.
E) Percentage return.

Question

Quizplus · Accepted Answer

The dollar-weighted average return takes into account the impact of cash inflows and outflows, making it a more accurate measure of the actual return earned by an investor. This is because it factors in the timing and size of the investor's contributions and withdrawals. The total return includes both capital gains and income, while the average capital gains yield only measures the return generated from changes in the price of an asset. The arithmetic average return simply calculates the average return earned over a period, regardless of when inflows and outflows occurred. The percentage return is too vague and doesn't specify which type of return is being measured.

The Average Compound Return Earned Per Year Over a Multiyear