You pay $216,000 to the Capital Hedge Fund which has a price of $18.00 per share at the beginning of the year.The fund deducted a front-end commission of 4%.The securities in the fund increased in value by 15% during the year.The fund's expense ratio is 2% and is deducted from year end asset values.What is your rate of return on the fund if you sell your shares at the end of the year?

Question

Quizplus · Accepted Answer

First, calculate the number of shares purchased:
$216,000 / $18 = 12,000 shares

Next, calculate the front-end commission:
$216,000 x 0.04 = $8,640

Subtract the commission from the total:
$216,000 - $8,640 = $207,360

Calculate the ending value of the investment:
$207,360 x 1.15 = $238,464

Calculate the expenses for the year:
$207,360 x 0.02 = $4,147.20

Subtract the expenses from the ending value:
$238,464 - $4,147.20 = $234,316.80

Calculate the selling price:
$234,316.80 / 12,000 = $19.53 per share

Calculate the rate of return:
($19.53 - $18) / $18 = 8.17%

Therefore, the answer is C, 8.19%.

You Pay $216,000 to the Capital Hedge Fund Which Has