A. An open-end fund has a net asset value of $11.10 per share. It is sold with a

Question

A. An open-end fund has a net asset value of $11.10 per share. It is sold with a front-end load of 8%. What is the offering price? (Round your answer to 2 decimal places.)

B.If the offering price of an open-end fund is $12.40 per share and the fund is sold with a front-end load of 6%, what is its net asset value? (Round your answer to 2 decimal places.)

C.

The composition of the Fingroup Fund portfolio is as follows:

The fund has not borrowed any funds, but its accrued management fee with the portfolio manager currently totals $25,000. There are 4 million shares outstanding. What is the net asset value of the fund?

D. You purchased 2,400 shares of the New Fund at a price of $30 per share at the beginning of the year. You paid a front-end load of 4%. The securities in which the fund invests increase in value by 13% during the year. The fund's expense ratio is 2.6%. What is your rate of return on the fund if you sell your shares at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Stock Shares Price A 220,000 $ 35 B 320,000 40 C 420,000 15 D 620,000 20

Explanation / Answer

A. NAV is $ 11.10 and front end load is 8%, hence the net purchase price = 11.10 * (1+8%) = $ 11.99

B. Offer price is $ 12.40 and front end load is 6%. Lets assume the NAV is x, then x * (1+6%) = 12.40 or

x = 12.40/(1+6%) = $ 11.70

C. The portfolio value:

Thus the gross portfolio value = $ 39,200,000 which includes management fees of $25000. At 4,000,000 units, the NAV will be = (39200000-25000)/4000000 = $ 9.79

D. Purchase Price = NAV * (1+front end load) hence Purchase Price = 30 * (1+4%) = 31.20

Purchase Value = 2400 * 31.20 = $ 74880.00

Appreciation in underlying securities = 13%, hence the gross increase in NAV will be = 30 * (1+13%) = 33.90

From this the expense ratio of 2.6% will be charged - the expense ratio is charged on average assets hence [(33.90+30)/2] * 2.6% = 0.83

Thus net NAV after 12 months will be (33.90 - 0.83) = $ 33.07

Now return for the investor = (33.07 - 31.20)/31.20 = 5.99%

Stock No. of Shares Price ($) Value ($) A 220,000 35 7,700,000 B 320,000 40 12,800,000 C 420,000 15 6,300,000 D 620,000 20 12,400,000 Total 39,200,000

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