Question

• Now imagine that you bought a mutual fund that had a beginning NAV of $10 per share. It paid dividends of $0.50 and distributed capital gains of $0.75. After one year, the ending NAV is $9.50. What is your total return?

Answer 1

Answer:

7.50% Is the total return

Explanation:

Given NAV beg = $10, D = $0.50, C = $0.75, NAV end=$9.50

To calculate Total return we take Ending NAV subtract beginning NAV and add any dividends and capital gains made during the period and then divide by beginning NAV

R = NAVend - NAVbeg +D+C/NAVbeg

=9.50 - 10 +0.50+0.75/10

 =0.075/7.50%

Answer 2

Answer:

The total return in % terms is 7.5% while it is $0.75 in dollar terms

Explanation:

Total return =NAV1-NAV0+Dividends+Capital gains/NAV0

NAV1  is the closing NAV at $9.50

NAV0 is the opening NAV at $10

Dividends is $0.50

capital gains is $0.75

Total return=($9.50-$10.00+$0.50+$0.75)/$10.00

Total return is 7.50%

Total return in dollar terms =($9.50-$10.00+$0.50+$0.75)

                                            =$0.75

The total return in % terms is 7.5% while it is $0.75 in dollar terms

The return is made of increase or decrease of NAV itself plus dividends and capital gains in share price.