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Miranda Cromwell, CFA, buys ₤2,000 worth of Smith & Jones PLC shares at the beginning of each year for four years at prices of ₤100, ₤120, ₤150 and ₤130 respectively. At the end of the fourth year the price of Smith & Jones PLC is ₤140. The shares do not pay a dividend. Cromwell calculates her average cost per share as [(₤100 + ₤120 + ₤150 + ₤130) / 4] = ₤125. Cromwell then uses the geometric mean of annual holding period returns to conclude that her time-weighted annual rate of return is 8.8%. Has Cromwell correctly determined her average cost per share and time-weighted rate of return?
A.
B.
C.
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