Have a problem with understanding concept in this example
Compute the investment performance of the fund during 2014:
And this is how it’s calculated in the book :
-> 1.01 beginning portfolio value = 100 mln
-> 1.05 dividends received before additional investment = 2 mln
ending portfolio value = 110 mln
hpr1= [2+ (110-100)]/ 100 = 12 %
new investment = 20 mln
-> 31.12 beginning market value for last 2/3 of year = 132 million
dividends received = 2.64 mln
ending portfolio value = 140 mln
hpr2= [2.64 + (140-132)] / 132 = 8,06 %
And my questions:
- shouldn’t we calculate the HPR for the period 1.01 to 30.04 ?
- on 1.05 they use $100 mln as the beginning value instead of the $110 mln - why is that ? there was a capital gain of $10 mln during the period 1.01 to 30.04
- how to include the $20 mln investment made on the 1.05 ? it’s not included in calculating the HPR in this period earlier. They use it as the beginning value on the 31.12 - $132 mln
Compute the investment performance of the fund during 2014:
- On 1.01.2014, the fund had market value of $100 million
- During the period, 1.01 to 30.04, the stocks in the fund showed a capital gain of $10 million
- On 1.05 the stocks in the fund paid a total dividend of $2 million. All dividens were reinvested in additional shares
- Because the fund’s performance had been exceptional, institutions invested an additional $20 million in the fund on 1.05, raising assets under management to $132 million
- On 31.12, fund received total dividends of $2.64 million. The fund’s market value on 31.12, not including $2.64 million in dividends, was $140 million.
And this is how it’s calculated in the book :
-> 1.01 beginning portfolio value = 100 mln
-> 1.05 dividends received before additional investment = 2 mln
ending portfolio value = 110 mln
hpr1= [2+ (110-100)]/ 100 = 12 %
new investment = 20 mln
-> 31.12 beginning market value for last 2/3 of year = 132 million
dividends received = 2.64 mln
ending portfolio value = 140 mln
hpr2= [2.64 + (140-132)] / 132 = 8,06 %
And my questions:
- shouldn’t we calculate the HPR for the period 1.01 to 30.04 ?
- on 1.05 they use $100 mln as the beginning value instead of the $110 mln - why is that ? there was a capital gain of $10 mln during the period 1.01 to 30.04
- how to include the $20 mln investment made on the 1.05 ? it’s not included in calculating the HPR in this period earlier. They use it as the beginning value on the 31.12 - $132 mln