The Exploratory Fund is a new closed-end fund which just offered its shares to the public. The fund raised $66.5 million and each share sold for $10. The fee for the fund promoter was 5.75% of the initial proceeds. What was the value of your initial $22,000 purchase before the shares began trading in the marketplace?

Question

Quizplus · Accepted Answer

The initial purchase value before shares began trading can be calculated by first determining the cost of the promoter's fee and then finding out how much of the initial investment remains. The promoter's fee is 5.75% of $66.5 million, which is $3,823,750. Subtracting this fee from the total raised gives the net amount available for investment: $66,500,000 - $3,823,750 = $62,676,250. Since each share sold for $10, the initial $22,000 would buy $22,000/$10 = 2,200 shares. The value of these shares before trading would still be $22,000 because the calculation of the promoter's fee affects the total fund size but not the initial per-share purchase price paid by the investor.

The Exploratory Fund Is a New Closed-End Fund Which Just