Assume that the given mutual fund investment earns monthly returns that are reinvested and subsequently earn at the
same rate. Find the beginning value of the investment, first monthly return, or effective annual rate of return as indicated.
-$$\begin{array} { c l c }
\hline & \text { Number of } & \text { Monthly } \
\text { Beginning } & \text { Shares } & \text { Percentage } \
\text { NAV } & \text { Purchased } & \text { Return } \
\hline \$ 11.00 & 332 & 2.77 \% \
\hline
\end{array}$$ Find the annual rate of return.

Question

Assume that the given mutual fund investment earns monthly returns that are reinvested and subsequently earn at the
same rate. Find the beginning value of the investment, first monthly return, or effective annual rate of return as indicated.
-$$\begin{array} { c l c } 
\hline & \text { Number of } & \text { Monthly } \
\text { Beginning } & \text { Shares } & \text { Percentage } \
\text { NAV } & \text { Purchased } & \text { Return } \
\hline \$ 11.00 & 332 & 2.77 \% \
\hline
\end{array}$$ Find the annual rate of return.

Quizplus · Accepted Answer

The effective annual rate of return can be calculated using the formula: $(1 + \text{monthly return})^{12} - 1$. Here, the monthly return is 2.77% or 0.0277. Thus, the annual rate is $(1 + 0.0277)^{12} - 1 \approx 0.388$ or 38.8%.

Assume That the Given Mutual Fund Investment Earns Monthly Returns