One Year Ago,you Purchased $6,000 Worth of a Mutual Fund

question 10

Multiple Choice

One year ago,you purchased $6,000 worth of a mutual fund at an offering price of $38.10 a share.Today,the fund distributed $0.20 in short-term gains and $1.04 in long-term gains.The current offering price is $41.80.The fund has a front-end load of 5 percent and total annual operating expenses of 1.25 percent.What is your rate of return on this investment?

• A)2.87 percent
• B)3.54 percent
• C)6.06 percent
• D)7.48 percent
• E)9.91 percent

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Definitions:

Recognize Income

Recognize income refers to the point in time when income is considered earned and must be reported for tax purposes.

Tax-exempt

Income or transactions that are legally excluded from taxation.

Economic Benefit

The advantage or gain received from a financial transaction or situation, which may have tax implications or influence fiscal decisions.

Nontaxable Return of Capital

A payment received from an investment that is not taxed because it is considered a portion of the original investment's cost being returned to the investor.