Dear all, I am facing a very basic problem when it comes to solving the questions related to TWRR & MWRR. I am pretty ok with finding the numerical values of the both, but when the question requires me to comment on the behaviour of TWRR of MWRR, i just can not understand what is actually being asked. Can anyone please help me out how to handle the "Comment" questions and how to express the opinion thereon. Regards ANSH
The examiners will generally be hoping you will ponder the differing results you obtain from the two techniques. Generally there is some detail of the investment being studied which makes a significant difference between the two methods.
The standard compare answer involves 3 aspects: Talk about the gains/losses in each part of the period (use the TWRR ratios to help with this). Compare the relative sizes of the MWRR and TWRR Comment why the above are different. This is always to do with the fact that the MWRR is weighted by the money, ie the cashflows. So if there is a loss just after a big cash inflow then the MWRR will weight that more and so it will be lower than the TWRR.
