One Reason the Time-Weighted Returns Calculation Is Preferable to the Dollar-Weighted

question 45

Multiple Choice

One reason the time-weighted returns calculation is preferable to the dollar-weighted returns calculation is because the

• A) latter measure is strongly impacted by the size and timing of cash flows
• B) former measure always overestimates returns
• C) latter measure will not account for dividends
• D) latter measure is overly price-sensitive

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Definitions:

Cash-Out Combinations

Financial strategies or transactions where owners of a business sell their stake in the company, partially or entirely, for cash.

Fair Dealing

A legal doctrine requiring parties to engage in business transactions in a just, equitable, and non-discriminatory manner.

Minority Shareholders

Shareholders who own a smaller portion of a company's shares, compared to majority shareholders, and often have limited influence on company decisions.

Limited Duration

Describes contracts, agreements, or conditions that are effective for a specific, finite period of time.