Question

a mutual fund has $375 million in assets at the start of the year and 12 million shares outstanding. the fund invests in a portfolio of stocks that provides dividend income at the end of the year of $5 million. the stocks included in the fund’s portfolio increase in price by 9%, but no securities are sold and there are no capital gains distributions. the fund charges 12b-1 fees of 1.5% which are deducted from portfolio assets at year end. what is the funds net asset value at the start and end of the year? what is the rate of return for an investor in the fund?f

Answer 1

Fund Value at the start of the year = 375 Millions

Net Asset Value = Fund Value / Number of shares

= 375 / 12

= $31.25 Per share

Calculation of the Net Asset Value at the end of the year

Fund Value at the end end before expense = 375 * ( 1 + 9%)

= $408.75 Millions

Dividend Income = 5 Millions

12-b1 fees = Fund Value at the end * 12b-1 Fees percent

= 408.75 *1.5%

= 6.13125

So, Net fund value = Fund Value before expense - Fees + Dividends

= 408.75 + 5 - 6.13125

= 407.61875

Net Asset Value = Fund Value / Number of shares

= 407.61875 / 12

= $33.9688 Per share

Rate of Return = (Fund Value in the end - Fund Value at the start) / fund value at the start

= (407.61875 - 375) / 375

= 8.6983%