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Mutual Fund Returns(LO2, CFA2) You invested $10,000 in a mutual fund at the beginning of the...

Mutual Fund Returns(LO2, CFA2) You invested $10,000 in a mutual fund at the beginning of the year when the NAV was $32.24. A the end of the year, the fund paid $0.24 in short-term distributions and $0.41 in long-term distributions. If the NAV of the fund at the end of the year was $35.23, what was your return for the year?

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Answer #1

Opening value of fund = $10000

NAV at opening = $32.34

NAV at closing = $35.23

No. Of mutual funds = Amount at beginning / NAV at beginning

No. Of mutual funds = $10000 /$32.24 = 310.1737

Distributions per fund = Short term distributions + Long term distributions = $0.24 + $0.41 = $0.65

Total distributions = $0.65 * 310.1737 = $201.61

Closing value of fund invested = No. Of funds * Closing NAV

Closing value of fund invested = 310.1737 * $35.23 = $10927.42

Total net benefit = (Closing value of fund - Opening value of fund) + Total distributions

Total net benefit = ($10927.42 - $10000) + $201.61

Total net benefit = $1129.03

Now,

Return on fund invested = Total net benefit/Opening value of fund

Return on fund invested = $1129.03 / $10000

Return on fund invested = 0.1129 or 11.29%

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