A year ago today, you invested $30,000 in a mutual fund that tracks the broad ma

Question

A year ago today, you invested $30,000 in a mutual fund that tracks the broad market index. This fund had a NAV of $24/share at the time you opened your account. The fund charges you a 4% front end load and a 3% back end load. During the course of the year, your fund paid out $7/share in distributions, which you fully reinvested in the fund by purchasing new shares at a price of $25/share. Today, your fund has a NAV of $29. How many shares were you able to purchase the day that you opened your account? How many additional shares did you purchase with your distributions? Calculate your HPR.

Explanation / Answer

Invested Amount = 30,000

With a front end load of 4%, the invested amount will be = 30,000*(1-0.04) = $28,800

Number of shares you were able to purchase on opening account =28,800/24 = 1,200 shares

Number of shares you were able to purchase on opening account = 1,200 shares

You got $7 a share as distribution. Total distribution = 7*1200 = 8,400

With front end load of 4% the amount that gest invested = 8200*(1-0.04) = 8,064

Number of shares purchased with disrtibution = 8,064/25 = 322.56 shares

Number of shares purchased with distribution = 322.56 shares

Total number of aviable shares = 322.56 + 1200 = 1,522.56 shares

At year, NAV is $29, its value = 1522.56*29 = 44,154.24

With a back end load of 3%, value realized = 44154.24*(1-0.03) = $42,829.6128

HPR = ($42,829.6128 - 30,000)/30,000 = 0.42765 = 42.765%

HPR = 42.77% (Rounded to 2 decimals)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.