You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends
-What is the dollar weighted return over the entire time period?
A) 2.87%
B) 0.74%
C) 2.60%
D) 2.21%

Question

You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends 
-What is the dollar weighted return over the entire time period?
A) 2.87% 
B) 0.74% 
C) 2.60% 
D) 2.21%

Quizplus · Accepted Answer

To calculate the dollar weighted return, we need to use the following formula:

Dollar Weighted Return = [(1+R1)(1+R2)...(1+Rn) - 1] x 100%

where R1, R2...Rn are the rates of return for each year.

Plugging in the values, we get:

Dollar Weighted Return = [(1+0.035)(1-0.047)(1+0.018)(1+0.024)(1-0.011)] - 1 x 100%
                     = 0.0074 x 100%
                     = 0.74%

Therefore, the best choice is B, with a dollar weighted return of 0.74%.

You Have the Following Rates of Return for a Risky