Question

8 years ago Mary purchased shares in a certain mutual fund at Net Asset Value (NAV) of $63. She reinvested her dividends into the fund, and today she has 6.4% more shares than when she started. If the fund's NAV has increased by 27.9% since her purchase, compute the rate of return on her investment if she sells her shares today. Round your answer to the nearest tenth of a percent.

Answer 1

To calculate the rate of return on her investment, multiply the original NAV by 1.279, multiply the original number of shares by 1.064, and calculate the percentage difference between the current investment value and the original investment value. The rate of return is 26.1%.

Step-by-step explanation:

To calculate the rate of return on Mary's investment, we need to consider the change in the Net Asset Value (NAV) of the mutual fund and the increase in the number of shares she holds.

First, let's calculate the new NAV by multiplying the original NAV by the increase percentage: $63 * (1 + 0.279) = $79.77.

Next, let's calculate the new number of shares by multiplying the original number of shares by 1.064: 1 * 1.064 = 1.064.

The rate of return on Mary's investment can be calculated as the difference between the current value of her investment (number of shares * new NAV) and the original investment value (number of shares * original NAV), divided by the original investment value, multiplied by 100 to get a percentage: ((1.064 * $79.77) - (1 * $63)) / (1 * $63) * 100 = 26.1%.