a.
Let NAV0 and NAV1 denote the fund’s net asset value at the beginning of the year and at the end of the year, orderly.
The return on the fund is shown below
=
=
= 10.96%
b.
The investor if holds the securities would avoid premium at beginning and discount at the end. This would deliver him higher return as there was premium at purchase time and discount at time of sale
The return from holding the securities
directly would have been
(NAV1 – NAV0 + 1.5) / NAV0
= (11.20 − 11 + 2.1) / 11
= 20.90 %
A closed-end fund starts the year with a net asset value of $11.00. By year-end, NAV...
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