Tom Decides to Begin Investing Some Portion of His Annual

Multiple Choice

Tom decides to begin investing some portion of his annual bonus, beginning this year with $5,000. In the first year he earns a 10% return and adds $3,500 to his investment. In the second his portfolio loses 5% but, sticking to his plan, he adds $500 to his portfolio. In this year his portfolio returns 2%. What is Tom's dollar-weighted average return on his investments?

A) 0.34%
B) 1.02%
C) 1.54%
D) 2.23%
E) 2.58%