Final answer:
To calculate the offering price of an open-end fund with a NAV of $11.40 per share and a 7% front-end load, divide the NAV by 1 minus the load percentage, resulting in an offering price of approximately $12.26 per share.
Step-by-step explanation:
The student has asked how to calculate the offering price of an open-end fund that has a Net Asset Value (NAV) of $11.40 per share and is sold with a front-end load of 7%. To find the offering price, you need to add the front-end load to the NAV. The front-end load is calculated as a percentage of the offering price, so the equation to solve for the offering price (P) looks like this:
P = NAV / (1 - Load Percentage)
In this scenario:
P = $11.40 / (1 - 0.07)
P = $11.40 / 0.93
P = $12.258
The offering price would be approximately $12.26 per share when rounded to the nearest cent. This calculation is crucial for buying and selling stocks, as investors need to know the actual cost per share after including sales charges.