Retain the supplied boundary
Use the declared timing, income treatment and currency. No unspecified fee, tax or reinvestment rate should be added. A positive cash entry can be investment income or owner capital depending on its source.
Explain the changed denominator
The wrong alternatives confuse complete ending wealth with an ex-income price, change the recovery base, or attribute an end deposit to performance. Record the reason for the error so the correction can transfer to another schedule.
Try the questions
Start value is 100. End asset price is 103, excluding a cash distribution of 4 received at the end. What is total holding-period return?
- A.
3%
- B.
7%
- C.
11%
Answer and explanation
Answer: B
Add the separately counted 4 once to the ending price 103.
- A
This measures price return only.
- B
Terminal wealth is 107 and gain is 7 on 100.
- C
This would add the distribution twice if starting from full terminal wealth 107.
An account earns nothing on 100, then receives an owner deposit of 50 at the period end. What is investment performance?
- A.
50%
- B.
0%
- C.
33.333333%
Answer and explanation
Answer: B
The external contribution reconciles the entire balance increase.
- A
The endpoint increase comes from new owner capital.
- B
Pre-deposit wealth remains 100; the transfer is not a gain.
- C
Using ending capital as a denominator still wrongly treats the deposit as gain.
Wealth falls from 100 to 80. What positive-base gain restores it to 100?
- A.
20%
- B.
25%
- C.
80%
Answer and explanation
Answer: B
The recovery percentage uses 80 as its starting base.
- A
A 20% gain on 80 ends at 96.
- B
20/80 is the required gain from the lower base.
- C
This confuses remaining wealth with a return.