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Question 1

Multiple Choice

Confidence Level

Low Medium High Mastered

The quarterly returns on a portfolio are as follows:
Quarter | 1 | 2 | 3 | 4
Return | 15% | –10% | 5% | –5%
The time-weighted rate of return of the portfolio is closest to:

2.0%

3.2%

4.5%

Explanation

The time-weighted rate of return is calculated as the geometric mean of the holding period returns (HPRs):
(1 + r_{1})(1 + r_{2})(1 + r_{3})(1 + r_{4})-1
(1.15)(0.90)(1.05)(0.95)−1 = 1.0324−1 = 0.0324 = 3.24%

Time-Weighted Returns

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Creating Copy

Question 1

The quarterly returns on a portfolio are as follows:
Quarter | 1 | 2 | 3 | 4
Return | 15% | –10% | 5% | –5%
The time-weighted rate of return of the portfolio is closest to:

Explanation

Tags

Time-Weighted Returns

Test Options

Reset All Confidence Levels

Creating Copy

Question 1

The quarterly returns on a portfolio are as follows:Quarter | 1 | 2 | 3 | 4 Return | 15% | –10% | 5% | –5%The time-weighted rate of return of the portfolio is closest to:

Explanation

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Full Answer

Rendered Formula:

The quarterly returns on a portfolio are as follows:
Quarter | 1 | 2 | 3 | 4
Return | 15% | –10% | 5% | –5%
The time-weighted rate of return of the portfolio is closest to: