CFA CFA Level 1 Money-Weighted Rate of Return

Money-Weighted Rate of Return

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    • Avatar of kas742kas742
      Participant
        • CFA Level 1
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        11
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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.

      • Avatar of kas742kas742
        Participant
          • CFA Level 1
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          7
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          Thank you! I appreciate it and that helps a lot.

        • Avatar of Aaron_BloombergPrepAaron_BloombergPrep
          Participant
            • CFA Charterholder
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            4
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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/

          • Avatar of svengalisvengali
            Participant
              • CFA Level 1
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              4
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              Ah awesome, thanks for the help! F04 would be 1 of course, so F03 will have to be 18.

            • Avatar of svengalisvengali
              Participant
                • CFA Level 1
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                3
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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%

              • Avatar of rahul12rahul12
                Participant
                  • CFA Level 3
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                  1
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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?

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