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Subject 3. Dollar-weighted and Time-weighted Rates of Return the portfolio is performing well (poorly), the dollar-weighted rate of return will be inflated (depressed).
The time-weighted rate of return measures the compound growth rate of $1 initial investment over the measurement period. <span>Time-weightedmeans that returns are averaged over time. This approach is not affected by the timing of cash flows; therefore, it is the preferred method of performance measurement.
Example
Jayson bought a share of I
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