Reference no: EM133183276

Question - Use the approximate yield formula to compute the rate of return on the investment in Part A and B, respectively. Show your steps to get partial credit. For dollar amount, keep two decimal places. For the approximate yields, keep three decimal places and express them as percentages.

Part A - Paul purchased 100 shares of a no-load mutual fund at a net asset value (NAV) of $85 per share. During the year, Paul received dividend income distributions of $4.50 per share and capital gains distributions of $9.10 per share. At the end of the year, the shares had a NAV of $80 per share.

Part B - Baron Growth Fund is a load fund. Two years ago, it was being quoted at a NAV of $33.50 and an offer price of $35.80; today, it's being quoted at a NAV of $34.18 and an offer price of $36.05. Use the approximate yield formula to calculate the rate of return on this load fund. The dividends and capital gains distributions over the two-year period are totaled at $2.80 a share.

Part C - If the growth fund in Part B above were a no-load fund, other things being equal, would the rate of return be higher or lower than that calculated in Part B? Why?