Question

An aggressive fund charges 4% FEL.The fund has 2m shares outstanding last year. This year the...

An aggressive fund charges 4% FEL.The fund has 2m shares outstanding last year. This year the fund has 20% new investor. If the fund has total assets of $210m and liabilities $13m in both years, find the price of the fund this year and last year

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Answer #1

Answer :-

Price of fund this year = $102.60

Price of fund next year = $93.28

Calculation :-

First we have to calculate NAV,

NAV = (Total assets - liablities ) / Shares outstanding

NAV (this year) = 210m-13m / 2m

= 98.5

Share outstanding nezt year = 2m + 20% ==> 2.2m

NAV (next year) = 210m -13m / 2.2m

= 89.55

Price of the fund = NAV / ( 1- FEL)

Price of the fund ( this year) = 98.5 / ( 1- 0.04)

= 98.5 / 0.96

= 102.60

Price of the fund ( next year ) = 89.55 / ( 1 - 0.04)

= 89.55 / 0.96

= 93.28

Note :- Front end load (FEL) is a charge or commission that investor pays upfront.

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