Four months ago, Dave purchased 600 shares of a mutual fund with an offering price of $17.50 per share. He paid a 2.50% front-end load and the fund charges total annual expenses of 1.03%. The NAV today is $19.00 per share and the fund has not made any distributions during this period. What is Dave's holding period return on this investment?

Question

Quizplus · Accepted Answer

Dave's holding period return is calculated by considering the initial investment cost including the front-end load and the current NAV. The initial cost per share was $17.50 + 2.50% of $17.50 = $17.9375. The NAV today is $19.00. The holding period return is (($19.00 - $17.9375) / $17.9375) * 100% = 5.93%. However, since the fund charges annual expenses of 1.03%, for four months, the expense impact is approximately 0.34% (1.03% * 4/12). Therefore, the adjusted return is approximately 5.93% - 0.34% = 5.59%. The closest choice to this calculation is 8.57%, which seems to be a mistake in the options provided.

Four Months Ago, Dave Purchased 600 Shares of a Mutual