Time Wighted Return periods, quarters, returns

wonderfuldream

If the quarterly returns are 10%, 15%, -8% and 4%, what is the time weighted rate of return.

Is it

a) 1 - 1.1*1.15*0.92*1.04

or

b) 1 - (1.1*1.15*0.92*1.04)^1/4

(a) is the yearly rate of return for 1 year while (b) is the annual rate of return for 4 periods(quarters in this case). In the exam should we go for (a) or (b)

cyber21

Well that's what we get for thinking logically

Maddin

Can't agree more...

lc26mizzou

its A cos the data is for 4 quarters in a year and not across multiple years. cant remember where i read that

marsilni

Yeah its a tricky question because when they present it in quarterly data you dont have to do ^0.25. If the data they presented were 4 years of data, then ^0.25 would get you 7-8% if i remember correctly.