Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to 1.8% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs? Hint: If the turnover rate is 50%, this means that, on average, 50% of the portfolio is sold and replaced with other securities each year. (Do not round intermediate calculations. Enter your answer as a decimal rounded to four decimal places.)
Total return reduced by trading costs: