About a year ago, Nigel bought some shares of a mutual fund. He bought the fund

Question

About a year ago, Nigel bought some shares of a mutual fund. He bought the fund at $24.50 a share and now trades for $26. Last year, the fund paid dividends of 40 cents per share and had Capitol gains of $1.83 a share. Using the approximate yield formula what is the rate of return on Nigel's investment? Would he have made a 20% rate of return of the stock had risen to $30 a share? About a year ago, Nigel bought some shares of a mutual fund. He bought the fund at $24.50 a share and now trades for $26. Last year, the fund paid dividends of 40 cents per share and had Capitol gains of $1.83 a share. Using the approximate yield formula what is the rate of return on Nigel's investment? Would he have made a 20% rate of return of the stock had risen to $30 a share?

Explanation / Answer

Ans;

% Yield = (P1-P0+Div+Cap Gain)/P0 * 100%

1. % Yield = ($26 - $24.5 + 0.40 + 1.83)/$24.5 = 15.22%

2. % Yield = (30 - $24.5 + 0.40 + 1.83)/$24.5 = 31.55% - Yes, 20% return exceeded at $30.

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