Question

A year​ ago, the Really Big Growth Fund was being quoted at an NAV of ​$21.63 and an offer price of ​$22.77. ​Today, it's being quoted at ​$23.56 ​(NAV) and ​$24.80 ​(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 ​$1.38 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.)

The holding period return on this load fund is _%.

Answer 1

The holding period return on this load fund is _%.

Answer: 9.53%

Working

Formula for calculating holding period return is,

Notes

NAV at the time of sale is taken as sale value because, that is the net amount we receive when we sell the security. Since this is a load fund from the offer price commission will be deducted and we will receive NAV.

But at the time of purchase we can only purchase at offer price. There is no option to purchase the security at NAV value.