The KML mutual fund has a net asset value of $12.34 and an offer price of $13.34
ID: 2739892 • Letter: T
Question
The KML mutual fund has a net asset value of $12.34 and an offer price of $13.34. Use this information to answer the following question. () How many shares will you receive when you invest $1,000? What is the immediate asset value of these shares? What is the load charge for this transaction? Crcyiston Mutual Fund, a load fund, holds securities valued at $90,000,000 on August The fund had liabilities of $2,000,000 and 4, 800,000 shares outstanding. Calculate the net asset value per share on this day. () Marshall has calculated that he will need $1, 250,000 in his retirement fund in 40 years when he plans to retire. If Marshall can earn 8% annually over this period, how much does Marshall need to save annually to meet that goal? () Julie's employer has a defined benefits retirement plan which pays 3.2 percent of her last year's salary for each year of employment. Julie estimates her final salary will be $85,000 and she will have worked for 20 years. What is her expected retirement benefit? () Eric works for a company with a defined contribution benefit pension plan. He will[retire in ten years and expect his salary to be $100,000 in his last year of work.Explanation / Answer
1
a) Amount of investment/offer price: $1,000/$13.34 = 74.9625 shares.
b) Asset Value = # of shares x NAV of a share = 74.9625 x $12.34 = $925.04 asset value
c) Load charge = 1000 - 925.04 =$74.96, equal to 74.96/74.9625 = $1 per share.
2) Net asset value = Net Assets/# of shares outstanding = (90000000 - 2000000)/4800000 = $18.33
3) $1250000 is the FV of the annuity (the annual savings that he is going to make) of 40 years at 8%
1250000 = A*(1.08^40 - 1)/(0.08)
A = 1250000/[(1.08^40 - 1)/(0.08)
A = 1250000*(0.08)/(1.08^40 - 1) = $4,825.20
4) Expected retirement benefit = 0.032*20*85000 = $54,400
5) Social security will be = $1,325 * 12 = $15,900 annually
Amount needed = $ 100,000*0.8 = $80,000
Balance required from the employer's plan and other plans, = 80000 - 15900 = $64,100
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