A bank buys 150 shares of a company on 1 January 2012 at a price of $156.30 per share. A dividend of $10 per share is paid on 1 January 2013. Assume that this dividend is not reinvested. Also on 1 January 2013, the bank sells 100 shares at a price of $165 per share. On 1 January 2014, the bank collects a dividend of $15 per share (on 50 shares) and sells its remaining 50 shares at $170 per share.
A. Write the formula to calculate the money-weighted rate of return on the bank’s portfolio.
B. Calculate the time-weighted rate of return on bank’s portfolio.