Question

You decide to invest $100,000 in cryptocurrencies and you use that amount to buy bitcoin. Your bitcoin appreciate by 30% in one month, at which point you liquidate half your position for cash, which you do not reinvest. Bitcoin appreciates by another 25% during the second month and you sell an additional 40% of your holdings. The cryptocurrency then falls by 60% in the third month, at which point you liquidate your entire position for cash.
What is your dollar weighted monthly return?

Answer 1

Answer: 19%

Explanation:

Dollar weighted monthly return = (w1 * r1) + (w2 * r2) + (w3 * r3)

Weight is the amount withdrawn.

r is the rate earned prior to withdrawal.

= (0.5 * 30%) + (0.4 * 25%) + (0.1 * -60%)

= 19%