Question

Kyle purchased 3000 shares of ABC fund 4 years ago at NAV of $14.0; back end load begins at 5% and declines by 1% each year to 0%; current NAV $30.20; want to sell 50 shares; what is the back-end load percentage?

Answer 1

Back end load is a percentage fee charged by the fund while encashing/ exiting the investment. It is also called as exit load. Back-end load fee/ charge is charged on NAV at the time of sale of units or shares.

In the given question back-end load for the first year is 5% and which declines by 1% each year. So back-end load % after 4 years will be= 5-(1%*4)=1%.

Back-end load percentage now i.e. after 4 years of investment is 1%.

Calculation total back-end load charge in the given case while selling 50 shares:

(No. of shares*NAV as on selling date)*back-end load percentage

=(50*30.20)*1%

=$15.1

Therefore net proceeds from sale of 50 shares after 4 years will be:

(No. of shares*NAV as on selling date)- Backend load fee

=1510-15.1

=$1494.9

Therefore total profit earned on shares:

=Proceeds from sale-(NAV as on purchase date* no. of shares)

=1494.9-(14*50)

=$794.9