Question

Assume that one year ago, you bought 250 shares of a mutual fund for $27 per share and that you received an income dividend of $0.34 cents per share and a capital gain distribution of $1.07 per share during the past 12 months. also assume the market value of the fund is now $29.50 a share. calculate the total return for this investment if you were to sell it now.

Answer 1

The total return of the mutual fund investment, considering dividend income, capital gain distribution, and capital gains from selling the shares, is $977.50.

Step-by-step explanation:

To calculate the total return on the mutual fund investment, we need to consider both the income from dividends and the capital gains from the increase in the market value of the shares. Originally, 250 shares were bought at $27 per share. The dividends received were $0.34 per share, and the capital gain distribution was $1.07 per share, while the current market value is $29.50 per share.

First, let's calculate the total dividend income and total capital gain distribution:

• Total Dividend Income = 250 shares * $0.34 per share = $85
• Total Capital Gain Distribution = 250 shares * $1.07 per share = $267.50

Now, let's calculate the capital gains from selling the shares:

Capital Gains = (Current Market Value per Share - Original Purchase Price per Share) * Number of Shares

Capital Gains = ($29.50 - $27.00) * 250 shares = $625

Finally, we add up all the components of the return:

Total Return = Total Dividend Income + Total Capital Gain Distribution + Capital Gains

Total Return = $85 + $267.50 + $625 = $977.50

The total return for this investment, upon selling all the shares now, would be $977.50.