Question

Investors' Choice Fund had NAV per share of $37.25 on January 1, 2012. On December 31 of the same year the fund's rate of return for the year was 17.3%. Income distributions were $1.14, and the fund had capital gain distributions of $1.35. Without considering taxes and transactions costs, what ending NAV would you calculate for Investors' Choice?

Answer 1

Answer:

Explanation:

As fund rate of return = (final NAV - Initial NAV + Income distribution) / (Initial NAV)

17.3% = (final NAV - 37.25 + 1.14 +

1.35)/ 37.25

Final NAV = 34.76 + 6.44

= 41.2 is the answer (ending

NAV)

Answer 2

Answer:

$42.55

Explanation:

The net asset value (NAV) of a fund is equal to all the fund's assets - all its liabilities, and is generally equal to its stock price.

We need to calculate the fund's current NAV, and to do so we can use the following formula:

ending NAV = [beginning NAV x (1 + rate of return)] - distributions

• beginning NAV = $37.25
• rate of return = 17.3%
• distributions = $1.14

ending NAV = ($37.25 x 1.173) - $1.14 = $43.69 - $1.14 = $42.55