Question

An investor purchases a mutual fund for $80. The fund pays dividends of $2.30, distributes a capital gain of $3, and charges a fee of $3 when the fund is sold one year later for $85.70. What is the net rate of return from this investment? (Enter your answer to the nearest whole number.)

Answer 1

10%

Step-by-step explanation:

Rate of Return = (Sale Price + Net Income Received - Purchase Price) / Purchase Price

Rate of Return = ($85.70 + ($2.3 + $3 - $3) - $80) / $80

Rate of Return = ($85.70 + $2.3 - $80) / $80

Rate of Return = $8 / $80

Rate of Return = 0.1

Rate of Return = 10%

So, the net rate of return from this investment is 10%