Question

15. The Eller Mutual Fund had a Net Asset Value (NAV) per share of $17.50 on January 1, 2019. On December 31, 2019 the fund’s NAV was $19.47. Income distributions were $0.75 per share and the fund had capital gains distributions of $1.00 per share. Ignoring taxes and transactions costs, what rate of return did an investor receive on the Eller Mutual Fund last year?

Answer 1

The rate of return is 21.26%

Step-by-step explanation:

Before calculating the return in percentage terms, it would be more appropriate to start with computing the return on the mutual fund in dollars ' terms.

Return in dollars terms;

Net Asset Value on 31 December 2019 $19.47

less

Net Asset Value on 1 January 2019 ($17.50)

return on NAV $1.97

Add:

Income distributions $0.75

Capital gains distributions $1.00

Total return on mutual fund $3.72

Rate of return=total return mutual fund/Opening net asset value

rate of return =$3.72/$17.50

=21.26%