On Dec31 2006 You Buy a Property for $1,000,000

question 8

Essay

On Dec.31 2006 you buy a property for $1,000,000. On Dec.31 2007 that property yields $100,000 of net cash flow which you take and spend on a New Year's Eve bash. Also on Dec.31 2007 the property is appraised at $1,010,000 in value, but you don't sell it then. On Dec.31 2008 the property yields another $100,000 in net cash flow which you spend on another bash, in part to celebrate the fact that you sold the property that very day for $1,200,000. There are no other cash flows from this investment.
A) What is the simple HPR total return on your investment in this property for the calendar year 2007?
B) What is the simple HPR total return on your investment in this property for the calendar year 2008?
C) What is the annual time-weighted arithmetic mean periodic total return for this property during the two-year period from the beginning of 2007 through the end of 2008?
D) What is the annual time-weighted geometric mean periodic total return for this property during the two-year period from the beginning of 2007 through the end of 2008?
E) What is the IRR per annum) on your investment in this property "cradle-to-grave" that is, over the entire 2-year period you held the property, from purchase to sale)?

• A) What is the simple HPR total return on your investment in this property for the calendar year 2007?
• B) What is the simple HPR total return on your investment in this property for the calendar year 2008?
• C) What is the annual time-weighted arithmetic mean periodic total return for this property during the two-year period from the beginning of 2007 through the end of 2008?
• D) What is the annual time-weighted geometric mean periodic total return for this property during the two-year period from the beginning of 2007 through the end of 2008?
• E) What is the IRR per annum) on your investment in this property "cradle-to-grave" that is, over the entire 2-year period you held the property, from purchase to sale)?

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