Quantitative Methods Q72

72An investor buys one share of a stock at $85 at t = 0. He buys an additional share for $90 at t = 1. The stock pays a dividend of $5 per share at t = 1 and t = 2. The investor sells both the shares at t = 2 for $100 each. Which of the following is most likely the money weighted rate of return?

Option : C
Explanation : Calculate the outflows and inflows at t = 0, t = 1 and t = 2. Using a financial calculator, calculate the IRR. CF0 = - 85, CF1 = -85, CF2 = 210, CPT IRR = 14.94%.

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