How to Calculate the Dollar Weighted Rate of Return

How to Calculate the Dollar Weighted Rate of Return
Make sure to input your investment's present value as a negative number or the calculator will be unable to complete the calculation.

Input the present value as PV on your financial calculator. The initial cost of an investment is known as its present value in this financial calculation. Make sure to input the present value as a negative number so the calculator knows its a cash outflow.

Input the future value of the investment as FV on your financial calculator. The future value is the expected sale price of your investment. This will be a positive number as it is a cash inflow to an investor.

Record the total number of years of the investment. Input the number of years as N on your financial calculator.

Hit the interest button on your financial calculator and it will compute the dollar weighted return of the investment.

Example: An investment costs $10,000 and will return $25,000 in 6 years. What is its dollar weighted return?

Input:

PV = - 10,000

FV = 25000

N = 6

CPT r = 16.49 percent per year = the dollar weighted return