Question

A. You have $21,000 to invest. You could purchase shares in one mutual fund or try to diversify on your own. From your investment class you learn that you need to hold at least 25 different securities in an equal weighted portfolio to achieve a reasonably well diversified portfolio. If you pay an average commission of 3% of the dollar value of the stock you buy you will have to pay ______ in commissions per stock for a total commission of _____.

B.A fund has a market value of securities of $830 million, cash and receivables of $20 million, current liabilities of $14 million and has 17 million fund shares outstanding. What is the fund's NAV per share?

C.This year Shelly invested $27,000 in a mutual fund with a 6% front end load and estimated annual expenses of 1.44%. The fund's gross return is 14.0%. What is Shelly's first year return net of loads and expenses if expenses are calculated against ending NAV?

D. You buy a no load mutual fund share at a NAV of $23.50 and sell it one year later at $24.00. You also received a capital gain distribution of $2.20 and a dividend distribution of $1.30. What was your pre-tax HPR?

Answer 1

A) Now Investment per share = 21000/25 shares = 840$

Commission per share = 840*3% = 25.2$

Total commission = 25.2*25 = 630$

B) NAV per share = Assetless liability/ no of units

=(830+20) -14 /17

=49.176$

C) Statement showing net return

Particulars	Amount
Amount invested	27000
Less : front end load	1620
Net amount	25380
return @ 14%	3553.2
Total amount	28933.2
Less: Annual expenses @ 1.44%	416.6381
Closing balance	28516.56
Profit( closing balance less opening balance)	1516.562

D)

Particulars	Amount
Closing NAV	24
Opening NAV	23.5
Profit	0.5
Capital distribution	2.2
Dividend	1.3
Total profit	4
Return (4/23.5)	17.02%