Mr. XYZ Invested in the Fidelity LowPriceStock Fund in 2013.Suppose the prices of the fund were$10.00, $10.77,
Question:
Mr. XYZ Invested in the Fidelity LowPriceStock Fund in 2013.Suppose the prices of the fund were$10.00, $10.77, $9.56, and $10.63 at the beginning of January, April, July, October, respectively.
(a) What was the annualized return of Fidelity Low Price Stock Fund? If he only invested in the first 6 months, what was the annualized return of the fund?
(b) At the beginning of 2013, he invested $1,000 in the fund. he invested another $500 at the beginning of April, and then redeemed $500 from the Fund at the beginning of July. What was his account value at the beginning of October? What was his annualized return?
(c) Set up the equation and compute his dollar-weighted annual return in (b)? What if he did exactly the opposite as in (b), does there exist a dollar weighted return? If yes, what is it? If not, why not?
(d) What was his time-weighted annual return in (b)?
(e) Comparing dollar-weighted return with time-weighted return, what can you say?
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe