A closed-end fund starts the year with a net asset value of $12. By year-end, NAV equals $12.10. At the beginning of the year,the fund is selling at a 2% premium to NAV. By the end of the year, the fund is selling at a 7% discount to NAV. The fund paidyear-end distributions of income and capital gains of $1.50.Required:a. What is the rate of return to an investor in the fund during the year? (Do not round intermediate calculations. Round youranswer 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?(Round your answer to 2 decimal places.)Rate of return%

Information Provided: Beginning NAV = $12 Ending NAV = $12.10 Beginning NAV Premium = 10% Ending…

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? (Round your answer to 2 decimal places.)

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? (Round your answer to 2 decimal places.)

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

Section: Chapter Questions

Problem 1PS

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Question

A closed-end fund starts the year with a net asset value of $12. By year-end, NAV equals $12.10. At the beginning of the year,
the fund is selling at a 2% premium to NAV. By the end of the year, the fund is selling at a 7% discount to NAV. The fund paid
year-end distributions of income and capital gains of $1.50.
Required:
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?
(Round your answer to 2 decimal places.)
Rate of return
%

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