Final answer:
The fund's end-of-year asset value is 129.36 million after accounting for a 10% increase and a 2% expense ratio, giving a return of 7.8% per share. Front-end and back-end loads are fees charged at the time of purchase or sale of fund shares, whereas 12b-1 fees are annual charges included in the expense ratio.
Step-by-step explanation:
Rate of Return and Fund Fee Structures
To calculate the rate of return for the fund, we first consider the initial asset value and the percentage increase in value. The fund starts with 120 million in assets and increases by 10%, becoming 132 million. The expenses of the fund, including a 2% expense ratio, must be subtracted. This amounts to 2.64 million (2% of 132 million). Therefore, the end-of-year asset value is 129.36 million.
When calculating the rate of return for shareholders, we look at the per-share value increase. Since there are 10 million shares outstanding, we divide the asset increase (9.36 million) by the number of shares (10 million), giving us a rate of increase of $0.936 per share. However, to find the return percentage, we need to consider the starting asset per share value, which is $12 (120 million/10 million shares). The return, therefore, is 0.936/12, which equals 7.8% after the expense ratio is deducted.
Investment funds often have various fees. A front-end load is a fee paid when shares are purchased, and it reduces the amount actually invested in the fund. Conversely, a back-end load is a fee paid when shares are sold. In contrast to these, 12b-1 fees are included in the expense ratio and are used for fund marketing and distribution expenses, not an upfront or back-end charge.