Question

A year​ ago, the Really Big Growth Fund was being quoted at an NAV of ​$21.98 and an offer price of ​$22.90. ​Today, it's being quoted at ​$24.19 ​(NAV) and ​$25.20 ​(offer). What is the holding period return on this load​ fund, given that it was purchased a year ago and that its dividends and capital gains distributions over the year have totaled ​$1.63 per​ share? Assume that none of the dividends and capital gains distributions are reinvested into the fund. ​(​Hint: ​You, as an​ investor, buy fund shares at the offer price and sell at the​ NAV.)

Answer 1

12.75%

Step-by-step explanation:

Given that

Net assets value = $24.19

Dividend and capital gain distribution = $1.63

Offer price = $22.90

The computation of Holding period return is shown below:-

= (Net assets value + Dividend and capital gain distribution - Offer price) ÷ Offer price

= ($24.19 + $1.63 - $22.90) ÷ $22.90

= $2.90 ÷ $22.90

= 12.75%

So, for computing the holding period return we simply applied the above formula.