You have $16,000 to invest in a mutual fund with a NAV = $45. You choose a fund with a 4% front load, a 1% management fee, and a 0.25% 12b-1 fee. Assume that the management and 12b-1 fees are charged on year-end assets. The gross annual return on the fund's shares was 9%. What was your net annual rate of return to the nearest basis point?

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The correct answer is A because the net annual rate of return is 3.33%. The front load fee is deducted from the initial investment, so the investor only invests $15,360. The management fee and 12b-1 fee are charged on year-end assets, so the investor pays $153.60 in management fees and $38.40 in 12b-1 fees. The gross annual return on the fund's shares was 9%, so the investor earns $1,382.40 in capital gains. The net annual rate of return is calculated as follows:Net annual rate of return = (Ending value - Beginning value) / Beginning value= (($15,360 * 1.09) - $15,360) / $15,360= 3.33%

You Have $16,000 to Invest in a Mutual Fund with a NAV