Question

Assume that one year ago, you bought 320 shares of a mutual fund for $22 per...

Assume that one year ago, you bought 320 shares of a mutual fund for $22 per share and that you received an income dividend of $0.17 cents per share and a capital gain distribution of $0.22 cents per share during the past 12 months. Also assume the market value of the fund is now $24 a share. Calculate the total return for this investment if you were to sell it now.

(Do not round intermediate calculations. Round your answer to 2 decimal places.)

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Answer #1

Total return for the investment

Total return for the investment is the sum of the total dividend income and capital gain distributions plus the change in the market value

Total dividend income and capital gain distribution = (Dividend per share + Capital gain per share) x Number of shares purchased

= ($0.17 + $0.22) x 320 Shares

= $0.39 x 320 Shares

= $124.80

Change in the market value = (Sales price per share – Purchase price per share) x Number of shares purchases

= ($24.00 - $22.00) x 320 Shares

= $2.00 x 320 Shares

= $640.00

Therefore, the Total return for the investment = Total dividend income and capital gain distributions + The change in the market value

= $124.80 + $640.00

= $764.80

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