Question

XYZ Mutual Fund, an open-end investment company, has an NAV of $20 and a public offering price of $21.40. The prospectus states that the sales charge for purchases of fund shares of $25,000 through $49,999 is 4%. Approximately how many shares can the customer buy for $35,000?

Answer 1

1680 shares

Step-by-step explanation:

Given that

Sales charge = 4%

Net asset Value = $20

Amount = 35,000

Therefore,

Amount paid for sales charge

= 35000 × 0.04

= 1400

So,

The customer is left with 33,600 to buy shares .

Since NAV of the mutual fund = $20

So,

Number of shares = 33600 ÷ 20

= 1680 shares.

Note: in mutual fund open end investments, customers invest buy buying shares at net asset value (NAV). Hence why NAV was used in the calculations.