Question

Consider a mutual fund with $240 million in assets at the start of the year and 10 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $2.5 million. The stocks included in the fund's portfolio increase in price by 5%, but no securities are sold and there are no capital gains distributions. The fund charges 12b-1 fees of .75%, which are deducted from portfolio assets at year-end. a. What is the fund's net asset value at the start and end of the year

Answer 1

Net asset value at the start of the year = $240,000,000 / 10,000,000 shares

Net asset value at the start of the year = $24

Asset in the beginning $240,000,000

Increase in value $240,000,000*5% $12,000,000

Assets at the end $352,000,000

Less: 12b-1 Charges $352,000,000 * 0.75%) $2,640,000

Asset at the end $349,360,000

Net asset value at the end of the year = $349,360,000/10,000,000 shares

Net asset value at the end of the year = $34.936