(Solution) - John Wilson buys 150 shares of ABM on 1 January -(2025 Original AI-Free Solution)

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John Wilson buys 150 shares of ABM on 1 January 2002 at $156.30 per share. A dividend of $10 per share is paid on 1 January 2003. Assume that this dividend is not reinvested. Also, on January 1, 2003 Wilson sells 100 shares at a price of $165 per share. On January 1, 2004, he collects a dividend of $15 per share (on 50 shares) and sells his remaining 50 shares at $170 per share.
a. Write the formula to calculate the money-weighted rate of return on Wilson's portfolio.
b. Using any method, compute the money-weighted rate of return.
c. Calculate the time-weighted rate of return on Wilson's portfolio.
d. Describe a set of circumstances for which the money-weighted rate of return is an appropriate return measure for Wilson's portfolio.
e. Describe a set of circumstances for which the time-weighted rate of return is an appropriate return measure for Wilson's portfolio.