00:01
So, in this question, let's calculate the dollar weighted return to find the present value of all cash flows, dividends and sale proceeds and then determine the geometric average return.
00:13
So, let's breakdown the following cash flows.
00:16
First of all, you have to write the initial investment, dividend received, sale of one share, then dividend received on 1 .20, then sale of one share.
00:30
So, now let's calculate the present value of these cash flows.
00:35
So, after that you have to calculate the dollar weighted return.
00:40
You need to consider the cash flow and their respective present value.
00:45
So, the correct formula for dollar weighted return is equal to ending value minus beginning value minus net cash flow divided by beginning value plus net cash flows.
00:56
So, let's apply this formula into provided information...