Question

You purchased 500 shares in a mutual fund for $32 NAV. You elected the dividend reinvestment plan and had all dividend and capital gains distributions reinvested in additional shares. You just closed your account and sold 550 shares for $48 NAV. What was your total return on this investment?

Answer 1

Return on investment = 50%

Step-by-step explanation:

Return on Investment is the proportion of investment cost that an investor earns as as return in dollar

For a mutual fund= total return in dollar/investment cost

= (48-32)× 500/(500× 32) × 100

=50%

Note that the gains in dollar is the difference between the selling price at the end and the selling price at the beginning.