Q 21- here we are comparing the TWR vs MWR. How do we calculate it here?
The period breakdown is almost 4 months in the first period and 9 months for the next period. For TWR, how do we account for different length of period in calc?
Thanks
I don’t know for Q21, but you should break to subperiods than for each point apply same equation ((EV-CF)-BV)/BV.
Then, you should simply chain link periodical rates of return to get total return by TWR.
Ex. (1+R1)(1+R2)(1+R3)-1 = Total return rate.
Don’t forget to calculate periodical return for those periods with no CFs as well. Also watch out for withdrawals which became positive in formula above (-(-CF)).
Regarding MWR, this calculation is iteration based and I suppose we will not be required to calculate MWR.
Anyway, it may be calculated as:
EV = BV(1+R)^N+CF1(1+R)^n1+CF2(1+R)^n2+…CFn(1+R)^nn
and than by trial and error solve for R.
Maybe someone who is more skilled on BAII Plus than me, may be able to quick solve for MWRR with calculator.