You purchased 4,200 shares in the New Pacific Growth Fund on January 2, 2016, at

Question

You purchased 4,200 shares in the New Pacific Growth Fund on January 2, 2016, at an offering price of $63.50 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 1 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 4 percent during 2016, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific Growth Fund is 1.25 percent, what is your total return from this investment? (Assume that the operating expense is netted against the fund’s return.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Explanation / Answer

Purchase price = Offer price = $63.50

Beginning NAV = Offer price x (1 - front load) = $63.50 x (1 - 0.05) = $60.325

Ending NAV = Beginning NAV x [ 1 - (Return - Expense ratio) ] = $60.325 x [ 1 + (0.04 - 0.0125) ] = $61.9839375

Sale price = Ending NAV x (1 - back end load) = $61.9839375 x (1 - 0.01) = $61.364098125

Return = (Sale price - Purchase price) / Purchase price = ($61.364098125 - $63.50) / $63.50 = (-)0.03363625 or (-)3.36%

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