Problem:
Arthur buys $2000 worth of stock. Six months later, the value of the stock has risen to $2200 and Arthur buys another $1000 worth of stock. after another eight months, Arthur's holdings are worth 2700 and he sells off $800 of them. Ten months later, Arthur finds that his stock has a value of $2100.
Required:
Question 1: Compute the annual time-weighted yield rate of the stock over the two-year period.
Question 2: Compute the annual dollar-weighted yield for Arthur over the two-year period.
Question 3: Should the answer in part (a) or part (b) be larger? Why?
Note: Provide support for your rationale.