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.
  • Author
    Posts
    • Up
      7

      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.

    • Up
      5

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

    • Up
      4

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

    • Up
      3

      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/

    • Up
      2

      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%

    • Up
      1

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

      Does this help?

Viewing 5 reply threads
  • You must be logged in to reply to this topic.