A closed-end fund starts the year with a net asset value of $12.00. By year-end, NAV equals $12.10. The fund paid dividend income distributions of $0.50 and capital gains distributions of $1.00 per share. At the beginning of the year, the fund was selling at a 2% premium to NAV. By the end of the year, the fund is selling at a 7% discount to NAV.

a) What is the rate of return to an investor in the fund during the year?

b) What would have been the rate of return to an investor who held the same securities as the fund manager during the year?