You purchased shares of a mutual fund at a price of $20 per share at the beginning of the year and paid a front-end load of 5.75%.If the securities in which the fund invested increased in value by 11% during the year,and the fund's expense ratio was 1.25%,your return if you sold the fund at the end of the year would be ____________%.

Question

Quizplus · Accepted Answer

The initial investment per share is $20, but after a 5.75% front-end load, the effective purchase price is $20 * (1 - 0.0575) = $18.85. The fund's value increases by 11%, so the end-of-year value per share is $18.85 * 1.11 = $20.9235. After accounting for the 1.25% expense ratio, the net value is $20.9235 * (1 - 0.0125) = $20.662. The return is ($20.662 - $20) / $20 = 3.31%, which is closest to 3.44% when rounded.

You Purchased Shares of a Mutual Fund at a Price