A Portfolio Manager Has the Following Sequence of Cash Flows

question 22

Multiple Choice

A portfolio manager has the following sequence of cash flows over a two year period:

$\begin{array}{c}\begin{array}{lll}\\\text {Time}\\0\\1\\2\end{array}\begin{array}{c}\text {Market Value}\\\text {before cash flow}\\\$0\\\$3,200\\\$6,000\end{array}\begin{array}{c}\\\text {Cash In}\\ \$ 3,000 \\\$ 1,950 \\-\$90\end{array}\begin{array}{c}\text {Market Value}\\\text {after cash flow}\\\$3,000\\\$5,150\\\$5,910\end{array}\end{array}$
Calculate the portfolio manager's time weighted return.

• A) 13.56%
• B) 11.48%
• C) 15.50%
• D) 8.75%
• E) 10.67%

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Definitions:

Correspondent Inference

The tendency to draw conclusions about a person's dispositional characteristics from their behavior.

Causal Relationship

A connection between two variables where a change in one directly affects the change in the other.

Actor-Observer Effect

A psychological phenomenon in which people tend to attribute their own actions to situational factors while attributing other people's actions to their internal characteristics.

Fundamental Attribution Error

The tendency to explain someone's behavior based on internal factors, such as personality or disposition, while underestimating external factors.