You invested $1,000 in a mutual fund with a 4% load when the NAV was $20 per share.If you sell your shares at an NAV of $24 per share,what is the return on your investment?

Question

Quizplus · Accepted Answer

First, we need to calculate how many shares you actually bought, taking the 4% load into consideration.

Load = 4% = 0.04 
Amount invested = $1,000 
NAV at the time of investment = $20

So,

Number of shares bought = (Amount invested / (NAV per share + Load)) 
= ($1,000 / ($20 + 0.04*$20)) 
= 50

Now, when you sell your shares at an NAV of $24 per share, your total proceeds will be:

Total proceeds = (Number of shares sold * NAV per share) 
= (50 * $24) 
= $1,200

Your total return is calculated as:

Total return = ((Proceeds from sale - Amount invested) / Amount invested) * 100%

= (($1,200 - $1,000) / $1,000) * 100%

= 20%

But since there was a load of 4%, your actual return after deducting the load is:

Actual return = Total return - Load 
= 20% - 4% 
= 16%

So, the option that is closest to this answer is B) 15.2%.

You Invested $1,000 in a Mutual Fund with a 4