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19 March, 04:18

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?

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  1. 19 March, 05:26
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    The rate of return is 21.26%

    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%
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