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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