Question

Chapter 13 Financial Planning Exercise 11 Calculating and evaluating mutual fund returns Here is the per-share performance record of the Abacus Growth-and-Income fund for 2017 and 2016: 2017 2016 1. Net asset value, beginning of period: $75.73 $70.00 2. Income from investment operations: 3. Net investment income $ 1.51 $ 1.26 4. Net gains on securities (realized and unrealized) 9.84 11.20 5. Total income from investment operations $11.35 $12.46 6. Less distributions: 7. Dividends from net investment income ($0.68) ($0.57) 8. Distributions from realized gains (5.41) (6.16) 9. Total distributions (6.09) (6.73) 10. Net asset value, end of period: $80.99 $75.73 Use this information to find the rate of return earned on this fund in 2016 and in 2017. Round the answers to two decimal places. Do not round intermediate calculations.

2016 return is what %

2017 return is what %

Answer 1

Solution:

Calculation of the rate of return earned on this fund in 2016 and in 2017:

Particulars	2017	2016
Net Investment Income	1.51	1.26
Net gains on securities (realized and unrealized)	9.84	11.2
Total Income (A)	11.35	12.46
NAV at the beginning (B)	75.73	70
NAV at the end ( C)	80.99	75.73
Rate of Return (C - B + A) / B	21.93%	25.99%

Note:

Only earnings will be considered in the return calculation and distributions does not impact the return

Return on Fund = (NAV at the end + Income Earned during the period - NAV at the beginning ) / NAV at the beginnning