About a year ago, Ramon Navarrete bought seme shares in the Saphire Lake Mutual Fund. He bought the fund at $25.00 a sham, and it row trades at $26.00.
Last year the fund paid dividends of 60 cents a share and had capital gains distributions of $2.70 a shares.
a. Using the approximate yield formula, what rate of return did Ramon earn on his investment? Round the answer to two decimal places.
b. Repeat the calculation using a hand-held financial calculator. Round the answer to two decimal places.
c. Would he have made a 20% rate of return if the stock had risen to $30 a share?