Question

Assume that one year ago, you bought 120 shares of a mutual fund for $31 a share, you received a capital gain distribution of $0.82 per share during the past 12 months, and the market value of the fund is now $36 a share. a. Calculate the total return for your $3,720 investment. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

To calculate the total return for your $3,720 investment, multiply the number of shares by the purchase price per share, calculate the total capital gain distribution received, then add the capital gain distribution to the current market value of the investment.

Step-by-step explanation:

Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends, and distributions realized over a period.

To calculate the total return for your $3,720 investment, you need to consider the initial cost of the investment, the capital gain distribution, and the current market value.

First, calculate the total cost of the investment by multiplying the number of shares (120) by the purchase price per share ($31): 120 x 31 = $3720.

Next, calculate the total capital gain distribution received by multiplying the number of shares (120) by the capital gain distribution per share ($0.82): 120 x 0.82 = $98.40.

Finally, calculate the total return by adding the total capital gain distribution to the current market value of the investment: $98.40 + (120 x $36) = $4620.

Therefore, the total return for your $3,720 investment is $4,620.