Question: One year ago Super Star Closed End Fund had an NAV

One year ago, Super Star Closed-End Fund had an NAV of $10.40 and was selling at an
18% discount. Today, its NAV is $11.69 and it is priced at a 4% premium. During the year, Super
Star paid dividends of $0.40 and had a capital gains distribution of $0.95. On the basis of this information, calculate each of the following:
a. Super Star’s NAV-based holding period return for the year.
b. Super Star’s market-based holding period return for the year. Did the market premium/discount hurt or add value to the investor’s return? Explain.
c. Repeat the market-based holding period return calculation, except this time assume the fund started the year at an 18% premium and ended it at a 4% discount. (Assume the beginning and ending NAVs remain at $10.40 and $11.69, respectively.) Is there any change in this measure of return? Why?

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  • CreatedApril 28, 2015
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