Answer-first summary for fast verification
Answer: 4.6%
The correct answer is **C (4.6%)** because it represents the money-weighted rate of return when the dividend is not reinvested. **Explanation:** - **Option A (4.4%)** is incorrect as it represents the money-weighted return when the dividend is reinvested. The calculation involves an IRR of approximately 4.403%, rounded to 4.4%. - **Option B (4.5%)** is incorrect as it represents the arithmetic mean return, calculated as (0.09 + 0.00)/2 = 4.5%. - **Option C (4.6%)** is correct because it reflects the money-weighted return when the dividend is not reinvested, with an IRR of approximately 4.601%, rounded to 4.6%. This question tests the understanding of money-weighted and time-weighted rates of return, a key concept in **Quantitative Methods**.
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
An investor records the following information and transactions for a stock:
| Year | Price per Share at Beginning of Year | Cash Flow at Beginning of Year |
|---|---|---|
| 1 | $100 | $100 used to purchase one share |
| 2 | $100 | $9 received in dividends and not reinvested |
| 3 | $100 | $100 received from selling one share |
The investor's money-weighted rate of return is closest to:
A
4.4%
B
4.5%
C
4.6%
