Question

the new fund had average daily assets of $5.8 billion last year. the fund sold $380 million worth of stock and purchased $475 million during the year. required: what was its turnover ratio?

Answer 1

The turnover ratio for the fund is calculated as the total sales divided by the average daily assets. With $380 million in sales and $5.8 billion in average daily assets, the turnover ratio is 6.55%.

Step-by-step explanation:

Turnover Ratio Calculation

The turnover ratio of a fund is calculated by taking the lesser of total purchases or total sales and dividing it by the average daily assets. In this case, we have the following information:

Average daily assets: $5.8 billion

Total sales: $380 million

Total purchases: $475 million

To calculate the turnover ratio, we'll take the lesser of total purchases or sales, which is $380 million (total sales), and divide that by the average daily assets of $5.8 billion. This calculation gives us a turnover ratio of:

Turnover Ratio = Total Sales / Average Daily Assets
Turnover Ratio = $380 million / $5.8 billion
Turnover Ratio = 0.0655 or 6.55%

Therefore, the fund's turnover ratio for the year was approximately 6.55%.