A fund had a value of $ 21,000 on 1 July 2003. A net cash flow of
Question:
A fund had a value of $ 21,000 on 1 July 2003. A net cash flow of $ 5,000 was received on 1 July 2004 and a further net cash flow of $8,000 was received on 1 July 2005. Immediately before receipt of the first net cash flow, the fund had a value of $ 24,000, and immediately before receipt of the second net cash flow the fund had a value of $ 32,000. The value of the fund on 1 July 2006 was $ 38,000.
(a) Calculate the annual effective money weighted rate of return earned on the fund over the period 1 July 2003 to 1 July 2006.
(b) Calculate the annual effective time weighted rate of return earned on the fund over the period 1 July 2003 to 1 July 2006.
(c) Explain why the values in (a) and (b) differ.
International Financial Reporting and Analysis
ISBN: 978-1408075012
5th edition
Authors: David Alexander, Anne Britton, Ann Jorissen