Question

Corporate Fund started the year with a net asset value of $12.50. By year-end, its NAV equaled $12.10. The fund paid year-end distributions of income and capital gains of $1.50. What was the rate of return to an investor in the fund?

Answer 1

The rate of return to an investor in the fund is 8.80%.

Step-by-step explanation:

Rate of return = [change in net asset value + distribution of income and capital gain]/(net asset value when the year started)

= [($12.10 - $12.50) + ($1.50)]/($12.50)

= [-$0.4 + $1.50]/($12.50)

= 0.088

= 8.80%

Therefore, the rate of return to an investor in the fund is 8.80%.