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% return the first year,he added $3,000 to his portfolio.In this year his investments lost 5%.Undeterred,Bill added $2,000 the next year and earned a 2% return.Last year,discouraged by the recent results,he only added $500 to his portfolio,but in this final year his investments earned 8%.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 CashFlow worksheet in a financial calculator, the cashflows to be entered are:CF0 = -1000CF1 = -3000CF2 = -2000CF3 = -500CF4 = (((((1000 * 1.1) + 3000) * .95) + 2000) * (1.02)) + 500) * 1.08 = $7,033.93Solve for IRR = 3.0%

Bill Has Been Adding Funds to His Investment Account Each