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Question 1:
Should interest payments and dividends that are paid to my money market account be added at each
time step on a cumulative basis?

For example:
Div/Int Equity
Starting Balance 0.00 1,000.00
1/1/2000 1.00 1,001.00
2/1/2000 5.00 1,006.00

On 2-1-2000 we were paid $4 in dividends. In attempting to keep equity correct, so that NAV will be correct, I am calculating a running cumulative total for dividends and interest paid to me in my money market account.

Is this correct?

Question 2:
How do we treat margin in using NAV accounting?
The amount borrowed does not show up in either NAV or units, but the increase or decrease in the underlying equity can be treated as either a gain or a loss in dividends or interest? The change will affect NAV and not the units.
I believe that we are thinking the same thing, except that I did not elaborate well enough. The amount of money borrowed on margin does not show up anywhere in NAV accounting until you pay the margin off. At that time the amount paid toward the debt decreases NAV and not units. While any gain in the stock price above our initial amount borrowed will increase the NAV. For example, let's say that I borrow $1,000 and the stock doubles. Now I have $2,000, but I owe $1,000. Therefore, I have a $1,000 increase in the value of my portfolio. This $1,000 increase increases the value of NAV. The reason I believe it should be treated as a dividend is that dividends like the $1,000 increases the equity portion of the portfolio and in doing so raises the NAV. If we have a money market account we receive interest payments on any cash that is not currently invested. These interest payments are a return on our money; therefore, they also increase NAV but not units.
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