Question

An investor purchases a mutual fund share for $100. The fund pays dividends of $2, distributes a capital gain of $3, and charges a fee of $1 when the fund is sold one year later for $101. What is the net rate of return from this investment?

Answer 1

Answer:

5%

Explanation:

Calculation for the net rate of return from this investment

First step is to calculate The dollar return

The dollar return=$2 + $3 + ($101 − $100) − $1

The dollar return =$2 + $3 + $1 − $1

The dollar return =$5

Now let The rate of return

The rate of return =$5/$100

The rate of return= 5%

Therefore the rate of return is 5%