Reference no: EM133115141
Mr. Jaffer is planning for retirement and wants to compare the past performance of a few mutual funds he is considering for investment. He believes that a comparison over a 5-year period would be appropriate. The following information is available to him from the Shaan Canadian Fund he is considering.
|
Year
|
Return
|
|
1
|
15%
|
|
2
|
-5%
|
|
3
|
10%
|
|
4
|
15%
|
|
5
|
3%
|
Required
Compute the holding period return for the 5-year period.
Compute the arithmetic average annual return.
Compute the geometric average annual return (growth rate).
Problem
Refer to the information on returns in Problem . Suppose Shaan Canadian Fund started with $30 million assets under management (AUM) and experienced the following cash inflows (deposits) and cash outflows (withdrawals) over the 5-year holding period:
$10.5 million deposits (D) at the end of year 1 (i.e. at the start of year 2)
$22.75 million withdrawals (W) at the end of year 2
$3 million deposits (D) at the end of year 3
$6.25 million deposits (D) at the end of year 4
Question: What is the money-weighed return?