XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End 2013

Question:

XYZ stock price and dividend history are as follows:

Year Beginning-of-Year Price Dividend Paid at Year-End

2013 .....................$100.............. $4

2014 ......................120 ................4

2015 .......................90 .................4

2016 .....................100................. 4

An investor buys three shares of XYZ at the beginning of 2013, buys another two shares at the beginning of 2014, sells one share at the beginning of 2015, and sells all four remaining shares at the beginning of 2016.

a. What are the arithmetic and geometric average time-weighted rates of return for the investor?

b. What is the dollar-weighted rate of return?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...