Question

The Global Growth Fund is a load fund with a 4 percent front load fee. It started the year with a net asset value (NAV) of $16.00. During the year the fund distributed $1.25, and at the end of the year its NAV was $17.65. What was the fund's return, and what was an investor's return? Round your answers to two decimal places.

The fund's return:   %

Return on the individual's investment:   %

Why are they different?

The answers are different because the fund reports its return based on the -Select-purchase pricenet asset valueItem 3  and the investrors calculate their return based on the -Select-purchase pricenet asset valueItem 4 .

Answer 1

Answers:

Front load fee = 4

Start NAV = $16.00

Funds Distributed = $1.25

End of Year NAV = $17.65

Suppose an investor puts in $100 in this fund

NAV of customer = (Invested amount – Front Load fee) / Start NAV

      = (100 – 4)/16 = 6

Amount at the end of year = 6 * 17.65 = $105.9

Funds return = (End NAV - Start NAV + Dividend Distributed) /Start NAV

          = ($17.65 - $16 + $1.25)/$16 = 18.125%

Return on Individual investment = $105.9 - $100 + $1.25 = 7.15

They are different as there is a front load of fees charged by fund house.

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