Q4. An analyst managed a portfolio for many years and then liquidated it. Computing the internal rate of return of the inflows and outflows of a portfolio would give the:

A)   money-weighted return.

B)   time-weighted return.

C)   net present value.

Q5. Time-weighted returns are used by the investment management industry because they:

A)   are not affected by the timing of cash flows.

B)   result in higher returns versus the money-weighted return calculation.

C)   take all cash inflows and outflows into account using the internal rate of return.

Q6. Why is the time-weighted rate of return the preferred method of performance measurement?

A)   Time-weighted returns are not influenced by the timing of cash flows.

B)   Time weighted allows for inter-period measurement and therefore is more flexible in determining exactly how a portfolio performed during a specific interval of time.

C)   There is no preference for time-weighted versus money-weighted.

答案和详解如下：

Q4. An analyst managed a portfolio for many years and then liquidated it. Computing the internal rate of return of the inflows and outflows of a portfolio would give the:

A)   money-weighted return.

B)   time-weighted return.

C)   net present value.

Correct answer is A)

The money-weighted return is the internal rate of return on a portfolio that equates the present value of inflows and outflows over a period of time.

Q5. Time-weighted returns are used by the investment management industry because they:

A)   are not affected by the timing of cash flows.

B)   result in higher returns versus the money-weighted return calculation.

C)   take all cash inflows and outflows into account using the internal rate of return.

Correct answer is A)

Time-weighted returns are not affected by the timing of cash flows. Money-weighted returns, by contrast, will be higher when funds are added at a favorable investment period or will be lower when funds are added during an unfavorable period. Thus, time-weighted returns offer a better performance measure because they are not affected by the timing of flows into and out of the account.

Q6. Why is the time-weighted rate of return the preferred method of performance measurement?

A)   Time-weighted returns are not influenced by the timing of cash flows.

B)   Time weighted allows for inter-period measurement and therefore is more flexible in determining exactly how a portfolio performed during a specific interval of time.

C)   There is no preference for time-weighted versus money-weighted.

Correct answer is A)

Money-weighted returns are sensitive to the timing or recognition of cash flows while time-weighted rates of return are not.

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