The holding period return for mutual funds should be based on
A) net asset value exclusively.
B) dividend income exclusively
C) capital gains distributions exclusively
D) capital gains distributions and dividends.

Question

Quizplus · Accepted Answer

The holding period return for mutual funds should be based on both capital gains distributions and dividends as these are the sources of income for mutual fund investors. Net asset value alone does not reflect the return received by the investor, as changes in the NAV can reflect changes in the underlying value of the securities held by the mutual fund, as well as any expenses incurred by the fund. Dividend income and capital gains distributions are the main sources of current income for mutual fund investors and should be included in the calculation of the holding period return.

The Holding Period Return for Mutual Funds Should Be Based