The net asset value of shares in a closed-end investment company is $36. An investor buys the shares for $34 in the secondary market. The company distributes $1 and after one year, the net asset rises to $42. The investor sells the shares for $44 in the secondary market.
a. What is the discount?
b. What is the percentage return on the investment?
c. In both problems 1 and 2, the investment company's net asset value rose from $36 to $42 and the company distributed $1. Why are the percentage returns different?

Question

The net asset value of shares in a closed-end investment company is $36. An investor buys the shares for $34 in the secondary market. The company distributes $1 and after one year, the net asset rises to $42. The investor sells the shares for $44 in the secondary market. 
a. What is the discount? 
b. What is the percentage return on the investment? 
c. In both problems 1 and 2, the investment company's net asset value rose from $36 to $42 and the company distributed $1. Why are the percentage returns different?

Quizplus · Accepted Answer

The Answer of The net asset value of shares in a closed-end investment company is $36. An investor buys the shares for $34 in the secondary market. The company distributes $1 and after one year, the net asset rises to $42. The investor sells the shares for $44 in the secondary market. 
a. What is the discount? 
b. What is the percentage return on the investment? 
c. In both problems 1 and 2, the investment company's net asset value rose from $36 to $42 and the company distributed $1. Why are the percentage returns different?

The Net Asset Value of Shares in a Closed-End Investment