You invested $2,000 in a mutual fund 20 months ago when the NAV of the fund was $18.90. You have not acquired or sold any shares since that time. Today, the NAV has risen to $19.40. The fund has no front-end load, but charges a contingent deferred sales charges of 5%, 5%, 4%, 3%, 2%, and 1% if the shares are redeemed within the first 6 years, respectively. How much money will you receive if you redeem your shares today?

Question

Quizplus · Accepted Answer

First, we need to calculate the current value of the investment:

Number of shares purchased = $2,000 / $18.90 = 105.820

Current value of investment = 105.820 x $19.40 = $2,053.30

Next, we need to calculate the contingent deferred sales charge (CDSC):

Since we have held the shares for 20 months, only the first CDSC of 5% applies.
CDSC = 5% x $2,053.30 = $102.67

Finally, we subtract the CDSC from the current value of the investment to get the redemption value:

Redemption value = $2,053.30 - $102.67 = $1,950.26

Therefore, the best choice is B, which is $1,950.26.

You Invested $2,000 in a Mutual Fund 20 Months Ago