A year ago, the Green Technologies Growth Fund was being quoted at an NAV of $21.50 and an offer price of $23.35; today, it’s being quoted at $23.04 (NAV) and $25.04 (offer). Use the approximate yield formula or a handheld financial calculator to find the rate of return on this load fund; it was purchased a year ago, and it dividends and capital gains distributions over the year totaled $1.05 a share.
To calculate the rate of return on the load fund, you can use the approximate yield formula. The formula is as follows:
Approximate Yield = (Ending NAV + Dividends + Capital Gains Distributions - Beginning NAV) / Beginning NAV
Let's plug in the given values into the formula:
Ending NAV = $23.04
Dividends + Capital Gains Distributions = $1.05
Beginning NAV = $21.50
Approximate Yield = ($23.04 + $1.05 - $21.50) / $21.50
Simplifying the calculation, we get:
Approximate Yield = $2.59 / $21.50
Now, let's evaluate this using a handheld financial calculator or any other calculator:
Approximate Yield ≈ 0.1207
To calculate the rate of return (ROR), multiply the approximate yield by 100 to express it as a percentage:
ROR ≈ 0.1207 * 100
ROR ≈ 12.07%
Therefore, the rate of return on the load fund purchased a year ago is approximately 12.07%.