Calculate the present value of an annuity immediate with 20 annual payments of 500 if the first payment of the annuity immediate
1 answer:
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Answer:
1.93%
Explanation:
The time weighted rate of return will be computed by combining the return at every time period demarcated by a withdrawal/addition.
<em>Time 1: Jan 1, 2016 to Sep 30, 2016</em>
start value = 100,000; end value = (105,000+5,000) = 110,000
Return =
<em>Time 2: Sep 30, 2016 to Sep 30, 2017</em>
start value = 105,000; end value = 108,000
Return =
<em>Time 3: Sep 30, 2017 to Dec 31, 2017</em>
start value = (108,000 + 3,000) = 111,000; end value = 100,000
Return = .
Therefore, time weighted return
= (1.1 * 1.028571 * 0.900901) - 1
= 0.019305
= 1.93%.