A closed-end fund starts the year with a net asset value of $11.00. By year-end, NAV equals $11.90. At the beginning of the year, the fund was selling at a 1.5% premium to NAV. By the end of the year, the fund is selling at a 7.5% discount from NAV. The fund paid year- end distributions of income and capital gains of $1.20. a. What is the rate of return to an investor in the fund during the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return % b. What would have been the rate of return to an investor who held the same securities as the fund manager during the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A closed-end fund starts the year with a net asset value of $11.00. By year-end, NAV equals $11.90. At the beginning of the year, the
fund was selling at a 1.5% premium to NAV. By the end of the year, the fund is selling at a 7.5% discount from NAV. The fund paid year-
end distributions of income and capital gains of $1.20.
a. What is the rate of return to an investor in the fund during the year? (Do not round intermediate calculations. Round your answer
to 2 decimal places.)
Rate of return
%
b. What would have been the rate of return to an investor who held the same securities as the fund manager during the year? (Do not
round intermediate calculations. Round your answer to 2 decimal places.)
Rate of return
%
Transcribed Image Text:A closed-end fund starts the year with a net asset value of $11.00. By year-end, NAV equals $11.90. At the beginning of the year, the fund was selling at a 1.5% premium to NAV. By the end of the year, the fund is selling at a 7.5% discount from NAV. The fund paid year- end distributions of income and capital gains of $1.20. a. What is the rate of return to an investor in the fund during the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return % b. What would have been the rate of return to an investor who held the same securities as the fund manager during the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return %
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Rate of return on securities means how much we have earned on all type of securities. This is basically difference between ending value and beginning value plus distributions. 

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