Question

You purchased 1,000 shares of the New Fund at a price of $39 per share at the beginning of the year. You paid a front-end load of 3.4%. The securities in which the fund invests increase in value by 8% during the year. The fund's expense ratio is 1.4%. What is your rate of return on the fund if you sell your shares at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

2.97%

Step-by-step explanation:

cost of shares = (NAV0 × shares) ÷ (1 - FL)

= ($39 × 1,000) ÷ (1 - 0.034)

= 40,372.67

NAV1 = NAVo (1 + investment return - expense ratio)

= $39 × (1 + 0.08 - 0.014)

= 41.574

value of shares = NAV1 × Shares

= 41.574 × 1,000

= 41,574

Return = (value of shares ÷ cost of shares) - 1

= (41,574 ÷ 40,372.67) - 1

= 2.97%