About a year ago, Nigel bought some shares of a mutual fund. He bought the fund
ID: 2767555 • Letter: A
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.