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Please only solve for part C A manager buys three shares of stock today, and...

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Finance

Please only solve for part C

A manager buys three shares of stock today, and then sells one of those shares each year for the next 3 years. His actions and the price history of the stock are summarized below. The stock pays no dividends.

Time

Price

Action

0

$

130

Buy 3 shares

1

150

Sell 1 share

2

150

Sell 1 share

3

150

Sell 1 share

a. Time-weighted geometric average return on this portfolio

Time

Cash

Return

0

3*-130= -390

1

1*150= 150

(150-130)/130= 15.38%

2

1*150= 150

(150-150)/150= 0%

3

1*150= 150

(150-150)/150= 0%

Geo Avg Ret= (1.1538)1/3 - 1 = 4.88%

b. The time-weighted arithmetic average return on this portfolio

Arith Avg Ret= (15.38+0+0)/3 = 5.13%

c. Calculate the dollar-weighted average return on this portfolio

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