Bill has been adding funds to his investment account each year for the past 3 years.He started with an initial investment of $1,000.After earning a 10 percent return the first year,he added $3,000 to his portfolio.In this year his investments lost 5 percent.Undeterred,Bill added $2,000 the next year and earned a 2 percent return.Last year,discouraged by the recent results,he only added $500 to his portfolio,but in this final year his investments earned 8 percent.What was Bill's dollar-weighted average return for his investments?
A) 1.5 percent
B) 2.0 percent
C) 2.5 percent
D) 3.0 percent
E) 3.5 percent

Question

Quizplus · Accepted Answer

Using the Cash Flow worksheet in a financial calculator, the cash flows to be entered are:
CF0 = -1000
CF1 = -3000
CF2 = -2000
CF3 = -500
CF4 = (((((1000 × 1.1) + 3000) × 0.95) + 2000) × (1.02)) + 500) × 1.08 = $7,033.93
Solve for IRR = 3.0 percent

Bill Has Been Adding Funds to His Investment Account Each