A) A closed end investment company is currently selling $10 and its net asset va

Question

A) A closed end investment company is currently selling $10 and its net asset value is $10.63.you decide to purchase 100 shares. During the year the company distributes $0.75 in dividend. At the end of the year, you sell the shares of $12.03.at the time of the sale, net asset value is $13.52 what percentage return do you earn on the investment? What role does the net asset value play in determining the percentage return?

B) A close end investment company is currently selling for $10 and you purchase 100 shares. During the year the company distributes $ 0.75 in dividends? At the end of the years, you sell the shares for $12.03 .the commission on each
transaction is $50.what percentage return do you earn on the investment?

C) You buy 100 shares in a mutual fund at its net asset value of $10.the fund charges a load fee of 5.5%.during the year, the mutual fund distributes $0.75 in dividends. You redeem the shares for their net asset value of $12.03 and the fund does not charge an exit fee. What percentage return do you earn on the investment?

D) You buy 100 shares in a no load mutual fund at its net asset value of $10 . During the year the mutual fund distributes $0.75 in dividend. You redeem the shares for their net asset value of $12.03 but the fund charges a 5.5 % exist fee. What percentage return do you earn on the investment?

E) you buy 100 shares in a no load mutual fund at its net asset value of $10.during the year , the mutual fund distributes $0.75 in dividends. You redeem the shares for their net asset value of $12.03 and the fund does not charge an exit fee. What percentage return do you earn on the investment?

F)  Compare your answers to parts (a) through (e).  What are the implications of the comparisons?  How would each of the following affect the percentage returns?
-  You buy and sell stocks through an online broker instead of a full-service broker.
-  You are in the 25% federal income tax bracket.
-  The distributions are classified as long-term instead of short-term term.
-  The purchases and sales occur in your retirement account (e.g., IRA).

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Explanation / Answer

A) A closed end investment company is currently selling $10 and its net asset value is $10.63.you decide to purchase 100 shares. During the year the company distributes $0.75 in dividend. At the end of the year, you sell the shares of $12.03.at the time of the sale, net asset value is $13.52 what percentage return do you earn on the investment? What role does the net asset value play in determining the percentage return? amount invest by you in the fund 1000 Amount earned as dividend 75 Amount received at time of redemption 1203 % return on investment = amt received on redemption+dividend earned/amount invested - 1 = 1278/1000 -1 = 1.278 -1 = 0.278 = 27.8%    Net asset value helps in determing the percentage return of fund. A fund's total return includes appreciation and distributions (dividends and capital gains). Total return is expressed as a percentage of the fund's NAV over a period of time.A fund's total return may not be the same as your net return. B) A close end investment company is currently selling for $10 and you purchase 100 shares. During the year the company distributes $ 0.75 in dividends? At the end of the years, you sell the shares for $12.03 .the commission on each trasaction is $50 what is the percentage return do you earn on investment amount invest by you in the fund 1000 Amount earned as dividend 75 Amount paid as commission 100 (as paid twice as two transaction one of purchase one of sale so,50*2) Amount received at time of redemption 1203 % return on investment = 1203+75-50/1000 - 1= 1.178 -1 = 0.178 = 17.8% C) You buy 100 shares in a mutual fund at its net asset value of $10.the fund charges a load fee of 5.5%.during the year, the mutual fund distributes $0.75 in dividends. You redeem the shares for their net asset value of $12.03 and the fund does not charge an exit fee. What percentage return do you earn on the investment? amount invest by you in the fund 1000 1000 Amount earned as dividend 75 75 Amount paid as load 55 55 Amount received at time of redemption 1203 1203 % return on investment = 1203+75-55/1000 - 1 = 1.223 - 1 = 0.223 = 22.3% D) You buy 100 shares in a no load mutual fund at its net asset value of $10 . During the year the mutual fund distributes $0.75 in dividend. You redeem the shares for their net asset value of $12.03 but the fund charges a 5.5 % exist fee. What percentage return do you earn on the investment? amount invest by you in the fund 1000 Amount earned as dividend 75 value in fund at time of redemption 1203 Exit fee 66.165 (this is 5.5% of 1203) Amount received at time of redemption 1136.835 (this is 1203 - 66.165) % return on investment = 1136.835+75/1000 - 1 = 1.2118 - 1 = 0.2118 = 21.18% E) you buy 100 shares in a no load mutual fund at its net asset value of $10.during the year , the mutual fund distributes $0.75 in dividends. You redeem the shares for their net asset value of $12.03 and the fund does not charge an exit fee. What percentage return do you earn on the investment? amount invest by you in the fund 1000 Amount earned as dividend 75 Amount received at time of redemption 1203 % return on investment = 1203+75/1000 - 1 = 1.278 - 1 = 0.278 = 27.8% F)  Compare your answers to parts (a) through (e).  What are the implications of the comparisons?  How would each of the following affect the percentage returns? -  You buy and sell stocks through an online broker instead of a full-service broker. -  You are in the 25% federal income tax bracket. -  The distributions are classified as long-term instead of short-term term. -  The purchases and sales occur in your retirement account By comparing answers to Parts (a) through (e) we notice that return on investment is reduced if we pay some charges like commission or entry and exit loads. Dividends add to the return on investment. Return on investment is calculated by taking purchase and sale price in consideration, while return on fund is calculated based on NAV only. -  You buy and sell stocks through an online broker instead of a full-service broker. online brokerage costs are lower than those of full-service brokers -  You are in the 25% federal income tax bracket. when you are in 25% or higher bracket Dividends are charged at 15%, Short term capital gains shall be charged at normal tax barket and Long term capital gains shall be taxed at 15% -  The distributions are classified as long-term instead of short-term term. Short term capital gains shall be charged at normal tax barket and Long term capital gains shall be taxed at 15% -  The purchases and sales occur in your retirement account investment in qualified retirement plan such as a 401(k), individual retirement account, or a variable annuity, you can defer taxes on all investment earnings until the funds are withdrawn from these accounts.

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