Answer:
Consider a mutual fund with $200 million in net assets (after deducting liabilities) at the start of the year and with 10 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $3 million. The stocks included in the fund's portfolio increase by 6% but no securities are sold and there no capital gains distributions. The fund charges 12b-1 fees of 0.5%. What is the rate of return for an investor in the fund?