Alex invested $10,000 in a mutual fund two and one-half years ago when the NAV of the fund was $25. Today, the NAV has risen to $28.30. Since the time of his original investment, Alex has obtained an additional 54.36 shares by reinvesting the fund distributions. The fund charges a contingent deferred sales charge of 6% the first year with the charge decreasing by 1% each year. How much money will he receive if he redeems his shares today?

Question

Quizplus · Accepted Answer

Alex initially purchased $10,000 / $25 = 400 shares. With reinvestment, he now has 400 + 54.36 = 454.36 shares. At a NAV of $28.30, the total value is 454.36 * $28.30 = $12,858.39. Since he's held the investment for two and a half years, the contingent deferred sales charge is 6% - 1% - 1% = 4%. The charge on $12,858.39 is 4% of $12,858.39 = $514.34. Subtracting this charge from the total value, $12,858.39 - $514.34 = $12,344.05.

Alex Invested $10,000 in a Mutual Fund Two and One-Half