Question

At the beginning of the year, you buy 800 shares in Muleshoe Mutual Fund, which currently has a NAV of $48.10. The fund has a front-end load of 1.8%. Over the year, the fund distributed capital gains of $1.75 per share and dividend distributions of $1.42. At the end of the year, the NAV was at $54.47 and the offer price was at $55.45.

A. If you sell after one year, what is your HPR?

B. Recalculate your HPR, assuming you bought 800 shares at the beginning of the year, reinvested all your distributions at an average price of $51, and sold your shares at the end of the year.

Answer #1

A.

Holding period Return =( Ending value + dividend yield + capital capital ) / beginning value

beginning value = 800 * 48.10 + 1.8% * 800*48.10 = 39172.64

Capital gains = 800 * 1.75 = 1400

dividend = 800 * 1.42 = 1136

Ending NAV = 55.47*800 = 44376

HPR = ( 44376 + 1136 + 1400 ) / 39172.64 - 1 = 19.76%

B.

No of shares purchased from dividends = 1136 / 51*1.018 = 21.88

no of shares purchases from capital gains = 1400 / 51*1.018 = 26.97

Total extra investmnet done = 21.88 + 26.97 = 48.85

Ending value 49.73 shares = 48.85*54.47 = 2660.66

HPR = (44376 + 2660.66 ) / 39172.64 = 20.08%

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24.51 per share. The fund distributed dividends of ?$2.11 and
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