Eastern States Mutual Fund sold $82.5 million of assets during the year and purc

Question

Eastern States Mutual Fund sold $82.5 million of assets during the year and purchased $93 million of new assets. The average daily assets of the fund were $330 million. What is the fund's turnover rate for the year?

Matt owns 724.08 shares of a fund which has a current NAV of $41.04. He has owned all of these shares for 3.3 years. The fund charges a contingent deferred sales charge which starts at 5 percent for the first year and declines by 1 percent each year. How much cash will he receive if he redeems all of his shares today?

Explanation / Answer

Eastern States Mutual Fund sold $82.5 million of assets during the year and purchased $93 million of new assets. The average daily assets of the fund were $330 million. What is the fund's turnover rate for the year?

Fund's turnover rate = (total sales or purchases (excluding cash) whichever is less)/average daily assets of the fund

Fund's turnover rate = 82.5/330

Fund's turnover rate = 25%

Matt owns 724.08 shares of a fund which has a current NAV of $41.04. He has owned all of these shares for 3.3 years. The fund charges a contingent deferred sales charge which starts at 5 percent for the first year and declines by 1 percent each year. How much cash will he receive if he redeems all of his shares today?

Sales Charges would be applicable = 2% as it is being sold in 3.3 year

Cash will he receive if he redeems all of his shares today = (724.08*41.04)*(1-2%)

Cash will he receive if he redeems all of his shares today = $ 29,121.92

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