Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 17-06 Suppose that at the start of the year, a no-load mutual fund has a net asset value of $27.50 per share. During the

image text in transcribed
Problem 17-06
Suppose that at the start of the year, a no-load mutual fund has a net asset value of $27.50 per share. During the year, it pays its shareholders a capital gain and dividend distribution of $1.26 per share and finishes the year with an NAV of $30.42.
A) What is the return to an investor who holds 256.876 shares of this fund in his (nontaxable) retirement account? Do not round intermediate calculations. Round your answer to two decimal places.
_____ %
B) What is the after-tax return for the same investor if these shares were held in an ordinary savings account? Assume that the investor is in the 30% tax bracket. Do not round intermediate calculations. Round your answer to two decimal places.
______ %
C) If the investment company allowed the investor to automatically reinvest his cash distribution in additional fund shares, how many additional shares could the investor acquire? Assume that the distribution occurred at year end and that the proceeds from the distribution can be reinvested at the year-end NAV. Do not round intermediate calculations. Round your answers to three decimal places.
Nontaxable distribution: _______shares
Taxable distribution: _____ shares
Problem 17-06 Suppose that at the start of the year, a no-load mutual fund has a net asset value of $27.50 per share. During the year, it pays its shareholders a capital gain and dividend distribution of 51.26 per share and finishes the year with an NAV of $30.42 What is the return to an investor who holds 256.876 shares of this fundins (nontaxable) retirement account? Do not round Intermediate calculations. Round your answer to two cal places b. What is the after-tax return for the same investor if these shares were held in an ordinary savings account? Assume that the investor is in the 30% tax bracket. Do not round intermediate calculations. Round your answer to two decimal places c. If the investment company allowed the investor to automatically reinvest his cash distribution in additional fund shares, how many additional shares could the investor acquire? Assume that the distribution occurred at year and and that the proceeds from the distribution can be reinvested at the year and NAV. Do not round intermediate calculations. Round your answers to three decimal places Montaxable distribution: Taxable distribution: shares

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The ASQ Auditing Handbook

Authors: J. P. Russell,

4th Edition

0873898478, 978-0873898478

More Books

Students also viewed these Accounting questions

Question

What about the other numbers? How do I use float?

Answered: 1 week ago

Question

=+2. Who is the audience?

Answered: 1 week ago