Question

You purchased 2,000 shares of the New Fund at a price of $12 per share at the beginning of the year. You paid a front-end load of 4%. The securities in which the fund invests increase in value by 12% during the year. The fund's expense ratio is 2.2%. What is your rate of return on the fund if you sell your shares at the end of the year?

Answer 1

To calculate the rate of return on the fund, you need to consider the initial investment, front-end load, increase in value of the securities, and expense ratio. The final rate of return is 15.72%.

Step-by-step explanation:

To calculate your rate of return on the fund, you need to consider the initial investment, the front-end load, the increase in value of the securities, and the expense ratio.

Your initial investment is 2,000 shares * $12 per share = $24,000.

The front-end load is 4% of your initial investment, which is 0.04 * $24,000 = $960.

The increase in value of the securities is 12% of your initial investment, which is 0.12 * $24,000 = $2,880.

The expense ratio is 2.2% of the total asset value at the end of the year, which is 0.022 * ($24,000 + $2,880) = $571.68.

Your rate of return on the fund is calculated as: ($24,000 + $2,880 - $960 - $571.68) / $24,000 = 0.1572, or 15.72%.