Answer:
y = - 0.681 % ≈ -0.7 %
Step-by-step explanation:
Given:
April 19,1998 October 30, 1998
Value immediately prior to deposit 95 105
Deposit 2X X
amount in the account on January 1, 1999 = 115
effective dollar weighted yield = 0%
annual effective time weighted yield = y
To find:
Calculate y
Solution:
Given that the dollar weighted return is 0%
100 is deposited into investment account on January 1, 1998. So, add 100 to the deposits 2X X
100 + 2x + x = 115
3x = 115 - 100
3x = 15
x = 15/3
x = 5
Compute y
1 + y = (95/100)(105/105)(115/110)
1 + y = 0.95 * 1 * 1.045
1 + y = 0.99318
y = 0.99318 - 1
y = - 0.0068 * 100
y = - 0.681 % ≈ -0.7 %
y = -0.7 %
It is 1.600 since the hundredths is 4 and under.
