Final answer:
The rate of return on an investment in the INVT Fund can be determined by calculating the total return per share and dividing it by the initial NAV per share. The total return includes both capital gains and income gains. The investment yielded a 1% rate of return.
Step-by-step explanation:
The calculation of the rate of return for the INVT Fund investment involves assessing both the capital gain and the income gain received during the investment period. The NAV (Net Asset Value) per share at the beginning and end of the investment period can be calculated using the assets, liabilities, and outstanding shares. The initial NAV is computed by subtracting the liabilities from the assets and then dividing by the number of shares outstanding. Similarly, the final NAV is computed using the same method with the updated figures.
The calculation goes as follows:
- Initial NAV = ($350 million - $70 million) / 14 million shares = $20 per share
- Final NAV = ($400 million - $88 million) / 16 million shares = $19.50 per share
- Income Gain = $0.40 per share
- Capital Gain = $0.30 per share
The total return per share is thus the sum of the change in NAV, the income gain, and the capital gain, which would be (-$0.50 + $0.40 + $0.30) = $0.20 per share. To calculate the rate of return, the total return per share is then divided by the initial NAV per share:
Rate of Return = Total Return per share / Initial NAV per share = $0.20 / $20 = 0.01 or 1%
Therefore, the rate of return on the investment in the INVT Fund, without considering any loads, was 1%.