You invested $3,000 in a mutual fund just slightly less than four years ago when the NAV of the fund was $12.50. Today, the NAV has risen to $15.40. Over the four years, you obtained an additional 31.52 shares by reinvesting your fund distributions. The fund has no front-end load, but charges a contingent deferred sales charges of 6% the first year with the percentage of the charge decreasing by 1% each year. How much money will you receive if you redeem your shares today?

Question

Quizplus · Accepted Answer

First, we need to calculate the total number of shares you own today.

The initial investment of $3,000 divided by the NAV of $12.50 gives us:

$3,000 / $12.50 = 240 shares

Adding the 31.52 additional shares you obtained through reinvestment gives us:

240 + 31.52 = 271.52 shares

Now, we need to calculate the contingent deferred sales charge.

Since we are redeeming our shares after four years, the percentage charge is:

6% - (4 x 1%) = 2%

Therefore, the amount of the charge would be:

$15.40 x 2% x 271.52 shares = $832.36

The final redemption amount is then calculated as:

($15.40 x 271.52 shares) - $832.36 = $4,055.97

Therefore, the best choice is C, $4,055.97.

You Invested $3,000 in a Mutual Fund Just Slightly Less