Question

Three years? ago, you invested in the Future Investco Mutual Fund by purchasing 1,000 shares of...

Three years? ago, you invested in the Future Investco Mutual Fund by purchasing 1,000 shares of the fund at the price of $ 19.51 per share. Because you did not need the? income, you elected to reinvest all dividends and capital gains distributions. ? Today, you sell your 1,100 shares in this fund for ?$22.02 per share. If there were a 1?% load on this? fund, what would your rate of return? be?

The compounded rate of return on this investment over the? three-year period is

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Answer #1

Value of investment Three year Ago = 1,000 × $19.51

= $19,510

VAlue of Investment Three year Ago was $19,510.

Value of investment today = 1,100 × $22.02

= $24,222

Value of investment Today is $24,222

Load = 1%

Net Proceed from sale of investment = $24,222 × (1 - 1%)

= $23,979.78.

Net Proceed from sale of investment is $23,979.78.

Rate of return in three year = ($23,979.78 - $19,510) / $19,510

= $4,469.79 / $19,510

= 22.91%.

Total Return on investment is 22.91%.

Annual Return = [(1 + 22.91%) ^ (1 / 3)] - 1

= 1.0712 - 1

= 7.12%

Annual Return on investment is 7.12%.

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