Stan Invested $15,000 in a Mutual Fund with a 4

question 16

Essay

Stan invested $15,000 in a mutual fund with a 4% load when the fund's net asset value (NAV) was $10.00. Stan held his shares for three years before selling his shares when the fund's NAV was $13.25. Stan received three annual year-end dividends of $0.50, $0.60, and $0.75 per share in years one, two and three, respectively (his dividends were not reinvested). What annual return did Stan earn on his investment in the fund? Ignore other fees and operating expenses in calculating the return.

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Definitions:

Market-neutral Strategies

Investment strategies that seek to achieve returns independent of the direction of the overall market by simultaneously buying and selling related securities.

Convergence Arbitrage

A strategy involving the purchase of a security in one market and simultaneous sale in another, exploiting differences in prices as they converge.

Statistical Arbitrage

A quantitative approach to equity trading that seeks to exploit pricing inefficiencies between related financial instruments.

Multistrategy Funds

Investment funds that employ a variety of strategies across different asset classes to achieve diversification and manage risk.