Charlotte Smidt bought? 2,000 shares of the balanced? no-load LaJolla Fund exact
ID: 2617043 • Letter: C
Question
Charlotte Smidt bought? 2,000 shares of the balanced? no-load LaJolla Fund exactly 1 year and 2 days ago for a NAV of $8.06 per share. During the? year, the fund distributed investment income dividends of $0.32 per share and capital gains dividends of $0.37 per share. At the end of the? year, Charlotte, who is in the 35% ordinary tax bracket? (federal and state? combined) and pays a 15% capital gains rate on dividends and on capital gains for holding periods longer than 12? months, realized $9.11 per share on the sale of all? 2,000 shares.
Pretax HPR
After tax HPR
Explanation / Answer
Pre Tax Holding period return = Dividend + capital gain+(NAV'end - NAV'beginning)/NAV'beginning
= 0.32+0.37+(9.11 - 8.06) / 8.06*100
= 21.59% ie. return for holding the shares for one year.
After Tax Holding Period Return = dividend(1- tax rate)+ capital gain (1 - tax rate)+unrealised capital gain (1- tax)/ NAV'beginning
= 0.32(1- 0.35)+0.37(1-0.15)+(9.11-8.06)(1-0.15)/8.06
= 0.208+0.3145+0.8925 / 8.06
= 17.56%