If you want to measure the performance of your investment in a fund, including the timing of your purchases and redemptions, you should calculate the .

A. geometric average return

B. arithmetic average return

C. dollar-weighted return

D. index return

The correct answer is letter "C": dollar-weighted return.

Explanation:

The Dollar-Weighted Return (DWR) equals the Internal Rate of Return (IRR). DWR is calculated by computing the rate of return of the present value of all cash flows that equal the value of the investment made at the beginning. DWR helps calculate the rate of return of an investment.

The initial value of the investment equals the future cash flow of financial instruments such as dividends added.

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