Question

Assume that one year ago, you bought 120 shares of a mutual fund for $33 a share, you received a $0.60 per-share capital gain distribution during the past 12 months, and the market value of the fund is now $38 a share.

a. Calculate the total return for your $3,960 investment.
b. Calculate the percentage of total return for your $3,960 investment.

Answer 1

a. Calculate the total return for your $3,960 investment= $672

b) percentage of total return = 17%

Step-by-step explanation:

Total return is the sum of capital appreciation plus the distribution received over the course of the investment period.

Capital gain is the difference between the current value of the investment and the initial cost of the investment

Total return = capital gain + distributed dividends

Capital gain= ($38 × 120) - ($33× 120)

= $600

Distributed dividend = ($0.60× 120) = $72

Total return = $600 + $72 = $672

Percentage return =( total return/ cost of investment ) × 100

= 672/3,960 × 100

= 17%

a. Calculate the total return for your $3,960 investment= $672

b) percentage of total return = 17%