Question

WiseGuy Capital mutual fund has $200 million in assets and 10 million shares at the start of the year and with $250 million in assets and 11 million shares at the end of the year. During the year investors have received income distributions of $2 per share and capital gain distributions of $.25 per share. Assuming that the fund carries no debt, does not charge any load, and the total expense ratio is 2%, what is the rate of return on the fund

Answer 1

The return rate on the fund is "23.75%".

Step-by-step explanation:

The given values are:

In the starting of the year,

Mutual fund assets,

= $200

Share,

= 10 million

In the end of the year,

Income distribution,

= $2 per share

Capital gain distribution,

= $.25 per share

Total expense ration,

= 2%

Now,

The initial NAV will be:

=
`(200mn)/(10mn)`

=
`20`$

The final NAV will be:

=
`250-(250* 0.01)/(11)`

=
`22.5`

hence,

The return will be:

=
`(Change \ in \ NAV+Div+Capital \ gain \ distribution)/(Initial \ NAV)`

On substituting the values, we get

=
`(22.5-20+2+0.25)/(20)`

=
`(4.75)/(20)`

=
`0.2375`

i.e.,

=
`23.75`%