The Mercury Company is a fixed-income management firm that manages the funds of pension plan sponsors. For
Question:
Answer the below questions.
(a) What is the dollar-weighted rate of return for this client’s portfolio over the three-month period?
(b) Suppose that the $8 million cash outflow in the second month was a result of withdrawals by the plan sponsor and that the cash flow after adjusting for this withdrawal is therefore zero. What would the dollar-weighted rate of return then be for this client’s portfolio?
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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a The dollarweighted rate of return is computed by finding the interest rate that will make the present value of the cash flows from all the subperiods in the evaluation period plus the terminal marke...View the full answer
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