- Suppose that 20 years ago you invested $12,000 in a 5% load mutual fund with a $78.35 net asset value. All distributions
have been reinvested. Today you own 356.753 shares with an NAV of $114.03. Find the average annual rate of return for
your investment. - The Hopewell Regional Real Estate Fund has a $100,579,043 in assets and 945,155 shares. Mikka owns 58.348
shares of this fund. What is the value of her investment? - The Hopewell Cash Reserves Money Market Fund’s returns in the last 4 years have been 3.49%, 3.76%, 4.55%,
and 6.13%. If you had invested $3,000 in this fund 4 years ago, how much would you have today? What is the
average annual rate of return for this fund? - Over the past 10 years, the Hopewell Horizons Fund’s worst year has been a 3.7% loss, and its best year has been an
8.1% gain. The fund name doesn’t tell you what asset class this fund invests in. On the basis of these performance
fi gures, is this fund most likely a stock fund, a bond fund, or a money market fund? - Last year, Stephanie’s investment portfolio lost 8.5%. What rate of return does she need to earn this year in order to get
back to where she was at the start of last year?
F. Additional ExerciseThe cumulative rate of return of an investment over some period of time is the total return, expressed as a percentage,
over that period of time. It is not an annualized rate. Mutual fund performance fi gures often give cumulative returns either in
addition to, or instead of, annualized rates.- The Hopewell New Generations Fund reports that for the past 10-year period, the cumulative rate of return of the fund
has been 124.65%.
a. If I had invested $5,000 in this fund 10 years ago, how much would I have today?
b. What is the average annualized rate of return for this period?
c. If the average annual rate of return for the last 5 years has been 5.89%, what is the cumulative rate of return for
the last fi ve years?
d. For the values given, what were the cumulative and average annual rates of return for the fi rst 5 years of this ten
year period?Exercises 6.4 301Copyright © 2008, The McGraw-Hill Companies, Inc.