CFA CFA Level 1 Money-Weighted Rate of Return

Money-Weighted Rate of Return

  • This topic has 5 replies, 4 voices, and was last updated Aug-20 by svengali.
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  • kas742
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    Hello:

    I am enrolled in CIPM Level 1 and not as a Level 1 CFA candidate. I have been unable to come up with the right answer or enter it correctly in my BA II Plus calculator.

    From the textbook, calculate the internal rate of return of a portfolio with following valuation points and external cash flow (where dollar amounts are in millions):

    Market Value 31 March $56.3

    Market Value (prior to cash flow) 11 April $58.2

    Contribution (made at end of the day 11 April $9.8

    Market Value 30 April $69.6

    Solution: 69.6 = 56.3 x (1 + R) + 9.8 x (1 + R) 19/30 = 5.61% ((1 + R) is raised to 19/30 – I am not sure how to show it as an exponent)

    Note: The mid-period valuation on April 11 is not necessary for completing the IRR calculation.

    Thank you.

    rahul12
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    To show 19/30 as an exponent, you just press the “yˆx” button, then “(“, then “19/30”, then “)”, then “=”

    Does this help?

    svengali
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    I tried it in CF mode and got 5.41%. Not sure what I’m doing wrong…

    CF0 = -56.3

    C01 = 0

    F01 = 10

    C02 = -9.8

    F02 = 1

    C03 = 0

    F03 = 19

    C04 = 69.6

    CPT IRR = 0.1757% (per day)

    IRR (30 days) = (1.001757)^30 = 5.4%

    kas742
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    Thank you! I appreciate it and that helps a lot.

    Aaron_BloombergPrep
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    So close! I repeated the same great strategy as above on my BAII and got the answer with a couple edits:

    The F03 entry should just be 18, since there are 18 zeros after the 11th and prior to the 30th.

    Then the IRR shown is 0.181949818%.

    Once that is taken in gross to the 30th power, you get 1.05605

    This leads to the IRR for the period as about 5.61%. Best of luck!!!

    ___

    The quickest way to get your CFA® charter – https://www.bloombergprep.com/

    svengali
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    Ah awesome, thanks for the help! F04 would be 1 of course, so F03 will have to be 18.

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