Mr. Jaffer is planning for retirement and wants to compare the past performance of a few mutual funds he is considering for investment. He believes that a comparison over a 5-year period would be appropriate. The following information is available to him from the Shaan Canadian Fund he is considering. 

 

 

Year	Return
1	15%
2	-5%
3	10%
4	15%
5	3%

 

 

Required 

 

 

Compute the holding period return for the 5-year period. 

 

 

Compute the arithmetic average annual return. 

 

 

Compute the geometric average annual return (growth rate). 

 

 Problem 4 

 

 

Refer to the information on returns in Problem 3. Suppose Shaan Canadian Fund started with $30 million assets under management (AUM) and experienced the following cash inflows (deposits) and cash outflows (withdrawals) over the 5-year holding period: 

 

 

$10.5 million deposits (D) at the end of year 1 (i.e. at the start of year 2) 

 

 

$22.75 million withdrawals (W) at the end of year 2 

 

 

$3 million deposits (D) at the end of year 3 

 

 

$6.25 million deposits (D) at the end of year 4 

 

 

Question:

 

 

What is the money-weighed return?

Answer rating: 100% (QA)

Solution To calculate the holding period return for the 5year period we need to first calculate the ... View the full answer