Non-taxable retirement account

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4. Suppose that, at the start of the year, a no-load mutual fund has a NAV of $27.15 per share. During the year, it pays its shareholders a capital gain and dividend distribution of $1.12 per share. The fund finishes the year with a NAV of $30.34.
a) What is the return to an investor who holds 257.876 shares of this fund in his non-taxable retirement account?
b) What is the after-tax return to the same investor if the shares were held in an ordinary savings account, if the investor's tax rate is 30%?
c) If the investment company allowed the investor to automatically reinvest his cash distributions in additional fund shares, how many additional shares could the investor acquire? Assume that the distribution happened at year-end and that the proceeds of the distribution can be reinvested at the year-end NAV, with no transaction costs.

Reference no: EM13663093

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