Question

Consider a no-load mutual fund with $390 million in assets and 15 million shares at the start of the year and with $440 million in assets and 16 million shares at the end of the year. During the year investors have received income distributions of $3 per share and capital gain distributions of $0.20 per share. Assuming that the fund carries no debt, and that the total expense ratio is 2%, what is the rate of return on the fund?

Answer 1

15.96%

Step-by-step explanation:

Calculation for what is the rate of return on the fund

First step is to calculate NAV0

NAV0 = $390/15

NAV0= $26.00

Second step is to calculate NAV1

NAV1 = [$440 - ($440 × .02)]/16

NAV1= $26.95

Now let calculate the rate of return on the fund

Rate of return = ($26.95 - $26 + $3 + $.20)/$26

Rate of return=$4.15/$26

Rate of return=0.1596*100

Rate of return= 15.96%

Therefore the rate of return on the fund will be 15.96%