Answer: 10.4%

**Time-Weighted Return Calculation:** 1. **January – March period:** - Beginning value: $50,000 - Ending value: $51,000 - Return = (51,000 / 50,000) - 1 = 1.02 - 1 = 2.00% 2. **April – June period:** - Beginning value: $51,000 + $10,000 deposit = $61,000 - Ending value: $60,000 - Return = (60,000 / 61,000) - 1 = 0.9836 - 1 = -1.64% 3. **July – December period:** - Beginning value: $60,000 - $30,000 withdrawal = $30,000 - Ending value: $33,000 - Return = (33,000 / 30,000) - 1 = 1.10 - 1 = 10.00% 4. **Time-weighted return:** - TWR = [(1 + 0.02) × (1 - 0.0164) × (1 + 0.10)] - 1 - TWR = [1.02 × 0.9836 × 1.10] - 1 - TWR = 1.1036 - 1 = 0.1036 or 10.36% **Why this is correct:** - Time-weighted return eliminates the impact of cash flows by calculating returns for each sub-period separately and then linking them geometrically. - The calculation correctly accounts for the $10,000 deposit at the beginning of April and the $30,000 withdrawal at the beginning of July. - 10.36% is closest to 10.4% among the given options. **Key concept:** Time-weighted return is the preferred method for evaluating investment managers because it is not affected by the timing of cash flows into or out of the portfolio.

Author: LeetQuiz Editorial Team