Question

On January 1st, the shares and prices for a mutual fund at 4:00 pm are:

Stock	Shares owned	Price
1	1,000	$       1.92
2	5,000	$     41.18
3	3,800	$    19.08
4	9,200	$     37.19
5	2,000	$       2.51
cash	n.a.	$5,353.40
Liabilities		$1,500

Stock 3 announces record earnings, and the price of stock 3 jumps to $33.44 in after-market trading. If the fund (illegally) allows investors to buy at the current NAV, how many shares will $50,000 buy? If the fund waits until the price adjusts, how many shares can be purchased? What is the gain to such illegal trades? Assume 5,000 shares are outstanding. Based on the new information, what is NAV?

A $2 million fund is charging a back-end load of 1.5%, 12b-1 fees of 1%, and an expense ratio of 2.5%. Prior to deducting expenses, what must the fund value be at the end of the year for investors to break even?

Answer 1