A fund had a value of $150,000 on 1 July, 2006. A net cash flow...
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A fund had a value of $150,000 on 1 July, 2006. A net cash flow of $30, 000 was received on 1 July, 2007 and a further net cash flow of $40,000 was received on 1July, 2008. The fund had a value of $175,000 on 30 June 2007 and a value of $225,000 on 30 June, 2008. The value of the fund on 1 January, 2009 was $280,000
a. Calculate the time weighted rate of return per annum earned on the fund between 1 July, 2006 and 1 January, 2009.
b. Calculate the money weighted rate of return per annum earned on the fund between 1 July, 2006 and 1 January, 2009.
c. Explain why the time weighted rate of return is more appropriate than the money weighted of two investment managers over the same period of time.
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