Consider a mutual fund with $300 million in assets at the start of the year,and 12 million shares outstanding.If the gross return on assets is 18% and the total expense ratio is 2% of the year end value,what is the rate of return on the fund?

Question

Quizplus · Accepted Answer

The gross return on assets is 18%, so the assets grow to $300 million * 1.18 = $354 million. The expense ratio is 2% of the year-end value, which is 2% of $354 million = $7.08 million. The net asset value after expenses is $354 million - $7.08 million = $346.92 million. The rate of return is ($346.92 million - $300 million) / $300 million = 15.64%.

Consider a Mutual Fund with $300 Million in Assets at the Start