Consider a no-load mutual fund with $200 million in assets and 10 million shares at the start of the year,and $250 million in assets and 11 million shares at the end of the year.During the year investors have received income distributions of $2 per share,and capital gains distributions of $0.25 per share.Assuming that the fund carries no debt,and that the total expense ratio is 1%,what is the rate of return on the fund?

Question

Quizplus · Accepted Answer

First, we need to calculate the total income and capital gains distributions for the entire year.

- Income distributions: $2 per share x 10 million shares = $20 million 
- Capital gains distributions: $0.25 per share x 10 million shares = $2.5 million

Next, we need to calculate the net assets at the start and end of the year:

- Net assets at the start of the year: $200 million 
- Net assets at the end of the year: $250 million

Now, we can calculate the rate of return using the following formula:

Rate of Return = (Ending Net Assets + Distributions - Beginning Net Assets) / Beginning Net Assets

Plugging in the numbers:

Rate of Return = ($250 million + $20 million + $2.5 million - $200 million) / $200 million

Rate of Return = $72.5 million / $200 million

Rate of Return = 0.3625 or 36.25%

Therefore, the correct answer is B.

Consider a No-Load Mutual Fund with $200 Million in Assets