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6 December, 18:49

Consider a no-load mutual fund with $528 million in assets and 16 million shares at the start of the year and with $578 million in assets and 17 million shares at the end of the year. During the year investors have received income distributions of $3 per share and capital gain distributions of $0.45 per share. Assuming that the fund carries no debt, and that the total expense ratio is 2%, what is the rate of return on the fund

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  1. 6 December, 19:37
    0
    11.42%

    Explanation:

    NAV0 = Mutual fund in asset / Share

    $528 million / 16 million shares

    =33

    NAV1=578-578 (0.02) / 17

    =578-11.56/17

    =566.44/17

    =33.32

    Hence:

    Return NAV1-NAV0+Received Income distribution + Capital gain distribution / NAVO

    NAV0=33

    NAV1=33.32

    Received Income distribution = 3

    Capital gain distribution = 0.45

    33.32-33+3+0.45/33

    =3.77/33

    =0.1143*100

    =11.42%
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