Question

A closed-end fund starts the year with a net asset value of $21 . by year-end , NAV equals $20.5 . At the beginning of the year , the fund is selling at a 3% premium to NAV. By the end of the year, the fund is selling at a 4% discount to NAV . the fund paid year-end distributions of income and capital gains of 2.50$ . what is the rate of return to an investor in the fund during the year ?

Answer 1

Year beginning NAV	21
Purchase price	3% premium
Purchase price	21*(1+3%)
Purchase price	$                                 21.63
Year end NAV	20.5
Selling price	4% discount
Selling price	20.5*(1-4%)
Selling price	$                                 19.68
Year end distributions	$                                   2.50
Return on investment=	(19.68+2.50-21.63)/21.63
Return on investment=	0.025427647
Return on investment=	2.54%