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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Business

Talan Mendoza

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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Elisha Banks · Answer 1

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%