A portfolio manager has the following sequence of cash flows over a two year period. $$\begin{array} { | l | c | c | c | }
\hline \text { Time } & 0 & 1 & 2 \
\hline \text { autflows } & - \$ 2,000 & - \$ 500 & \
\hline \text { inflows } & & \$ 50 & \$ 3,090 \
\hline
\end{array}$$ Calculate the portfolio manager's dollar weighted return.
A) 13.56%
B) 11.48%
C) 15.50%
D) 8.75%
E) 10.67%

Question

A portfolio manager has the following sequence of cash flows over a two year period. $$\begin{array} { | l | c | c | c | } 
\hline \text { Time } & 0 & 1 & 2 \
\hline \text { autflows } & - \$ 2,000 & - \$ 500 & \
\hline \text { inflows } & & \$ 50 & \$ 3,090 \
\hline
\end{array}$$ Calculate the portfolio manager's dollar weighted return.
A) 13.56%
B) 11.48%
C) 15.50%
D) 8.75%
E) 10.67%

Quizplus · Accepted Answer

The dollar-weighted return is calculated as the average return of the portfolio over the investment period, weighted by the amount of money invested at each point in time. In this case, the portfolio manager has two cash outflows and two cash inflows. The dollar-weighted return is calculated as follows:```Dollar-weighted return = (Ending value - Beginning value) / Beginning value```The beginning value is the initial investment of -$2,000. The ending value is the sum of the cash inflows and outflows, which is $3,090 - $2,000 - $500 = $540. Therefore, the dollar-weighted return is:```Dollar-weighted return = ($540 - -$2,000) / -$2,000 = 13.56%```Therefore, the correct answer is A) 13.56%.

A Portfolio Manager Has the Following Sequence of Cash Flows