Walt and Cady Longmire were investing in shares of Wyoming Mining Company. The returns for the stocks during 2017, 2018, and 2019 were 10%, -5%, and 23.5%, respectively. At the beginning of 2017, Walt invested $5,000 in the stocks and he did not make any additional investment in 2018. At the end of 2018, Walt cashed out his entire investment in Wyoming Mining Company.

Meanwhile, his daughter Cady Longmire invested $3,000 in the stocks at the beginning of 2017. She later made no deposit in 2018 but invested an additional $5,000 at the start of 2019. At the end of 2019, Cady cashed out her entire investment in Wyoming Mining Company.

Answer the following:

Calculate and interpret Walt’s dollar-weighted average return for his 2-year investment in Wyoming Mining Company.

Compare Walt’s dollar-weighted average return to the geometric average return (for the 2-year investment period), do your answers make sense? Why or Why not? Did you have any expectations prior to your calculation?

Calculate and interpret Cady’s dollar-weighted average return for her 3-year investment in Wyoming Mining Company.

Compare Cady’s dollar-weighted average return to the geometric average return (for the 3-year investment period), do your answers make sense? Why or Why not? Did you have any expectations prior to your calculation?

Answer rating: 100% (QA)

To calculate Walts dollarweighted average return for his 2year investment in Wyoming Mining Company we need to consider the timing and amount of his investments Walt invested 5000 at the beginning of ... View the full answer