A year ago, an investor bought 600 shares of a mutual fund at $8.56 per share. Over the past year, the fund has paid dividends of $0.89 per share and had a capital gains distribution of $0.65 per share.
a. Find the investor's holding period return, given that this no-load fund now has a net asset value of $9.11. ( answer in % and 2 decimal places)
b. Find the holding period return, assuming all the dividends and capital gains distributions are reinvested into additional shares of the fund at an average price of $8.79 per share.
a. Holding Period Return = (Ending Net Asset Value - Beginning Net Asset Value + Dividends + Capital gains) / Beginning Net Asset Value*100
Answer = 24.42%
b. Cost of Purchase = 600 Shares *$ 8.56
= $ 5,136
Amount reinvested = (Dividends + Capital Distribution)*Number of Shares
= $ 924
Units received for the amount reinvested = Amount reinvested / average price
= $ 924/$ 8.79
Total Units after reinvestment = 600 units + 105.1194539 units
= 705.1194539 units
Closing Amount = $ 9.11 * 705.1194539 units
= $ 6,423.638225
Holding Period return = (Closing Amount - Cost of Purchase)/Cost of Purchase*100
= ($ 6,423.638225-5,136)/5,136*100
Answer = 25.07%
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