A mutual fund has a current offering price of $56.70. What is the net asset value if the fund charges a 4.5% front-end load?

Question

Quizplus · Accepted Answer

The net asset value (NAV) is the price per share of a mutual fund's underlying assets.

To calculate the NAV after a front-end load, we need to subtract the load rate from the current offering price and divide by 1 plus the load rate as follows:

NAV = (Offering price - Front-end load) ÷ (1 + Load rate)

In this case, the front-end load is 4.5%, so we have:

NAV = ($56.70 - 4.5% of $56.70) ÷ (1 + 4.5%) 
NAV = ($56.70 - $2.55) ÷ 1.045 
NAV = $54.15

Therefore, the answer is C.

A Mutual Fund Has a Current Offering Price of $56