2013 mock quant questoin

[yoyogu]

I’m stuck on this question,
[question removed by admin]
When I use my BAII Plus calculator to solve for IRR, I get A as the answer. However, this is the incorrect answer. Why is this method incorrect?
P.S. the answer is B

 

[Oscar]

It is asked for the Time Weighted Return (TWR = geometric mean) of the investment not for the Money Weighted Return (MWR = IRR).
So, the TWR would be:
1. Calculate the growth rates p.a.:
Y1: ((168+3) / 160) - 1 = (171 / 160) - 1 = 6.875%
Y2: ((175+4) / 168) - 1 = (179 / 168) - 1 = 6.548%
Y3: ((165+0) / 175) - 1 = (165 / 175) - 1 = -0.057%
2. Calculate the geometric growth over the 3yr. period:
TWR = ((1.06875 * 1.06548 * 0.94286)^(1/3)) -1 = 2.397 ~ 2.40 –> Corresponds to answer B
Best,
Oscar

 

[Gebura]

IRR is for money-weighted rate of return. The question asks for time-weighted rate of return (use HPR).

 

[yoyogu]

whoops, i realized that now.
thanks for your help everyone