A year ago, the Really Big Growth Fund was being quoted at an NAV of $21.98 and an offer price of $22.90. Today, it's being quoted at $24.19 (NAV) and $25.20 (offer). What is the holding period return on this load fund, given that it was purchased a year ago and that its dividends and capital gains distributions over the year have totaled $1.63 per share? Assume that none of the dividends and capital gains distributions are reinvested into the fund. ( Hint: You, as an investor, buy fund shares at the offer price and sell at the NAV.)

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Cynthia Dunn

18 December, 02:21

A year ago, the Really Big Growth Fund was being quoted at an NAV of $21.98 and an offer price of $22.90. Today, it's being quoted at $24.19 (NAV) and $25.20 (offer). What is the holding period return on this load fund, given that it was purchased a year ago and that its dividends and capital gains distributions over the year have totaled $1.63 per share? Assume that none of the dividends and capital gains distributions are reinvested into the fund. ( Hint: You, as an investor, buy fund shares at the offer price and sell at the NAV.)

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Sophie Townsend · Answer 1

12.75%

Explanation:

Given that

Net assets value = $24.19

Dividend and capital gain distribution = $1.63

Offer price = $22.90

The computation of Holding period return is shown below:-

= (Net assets value + Dividend and capital gain distribution - Offer price) : Offer price

= ($24.19 + $1.63 - $22.90) : $22.90

= $2.90 : $22.90

= 12.75%

So, for computing the holding period return we simply applied the above formula.