A year​ ago, an investor bought shares of a mutual fund at ​$ per share. This​ year, the fund has paid dividends of per share and had a capital gains distribution of ​$ per share. a. Find the​ investor's holding period​ return, given that this​ no-load fund now has a net asset value of ​$. b. Find the holding period​ return, assuming all the dividends and capital gains distributions are reinvested into additional shares of the fund at an average price of ​$ per share.

Complete Question

1. One year ago, an investor bought 200 shares of a mutual fund at $8.50 per share. Over the past year, the fund has paid dividends of $.90 per share and had a capital gains distribution of $.75 per share.

a. Find the investor's holding period return, given that this no-load fund now has a net asset value of $9.10.

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 $8.75 per share.

a. Holding period returns = 26.47%

b. Holding period returns = 27.41%

Explanation:

a) Data and Calculations:

Number of shares bought = 200

Price per share of the mutual fund = $8.50

Dividends per share = $0.90

Capital gains distribution per share = $0.75

Total initial investment cost = $1,700 (200 * $8.50)

Total dividends = $180 (200 * $0.90)

Total capital gains distribution = $150 (200 * $0.75)

Net asset value = $9.10 per share

Total net asset value = $1,820 (200 * $9.10)

Holding period returns:

Dividends  $180

Capital gains $150

Price change $120

Total returns = $450

Holding period returns = $450/$1,700 * 100 = 26.47%

Reinvestment of dividends and capital gains distribution:

Initial investment cost =    $1,700

Reinvestment cost =             330

Total investment costs = $2,030

Number of additional shares = $330/$8.75 = 38 shares

Total returns = $466 (238 * $9.10) - (200 * $8.50)

Holding period returns in percentage = $466/$1,700 * 100 = 27.41%

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