Consider a no-load mutual fund with $350 million in assets and 14 million shares at the start of the year and with $400 million in assets and 15 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 $0.25 per share. Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund?

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Business

John Wiley

31 December, 05:22

Consider a no-load mutual fund with $350 million in assets and 14 million shares at the start of the year and with $400 million in assets and 15 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 $0.25 per share. Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund?

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Sofia Hudson · Answer 1

14.6 %

Explanation:

Net assets value par share at the beginning of the year = $350 million / 14 million = $ 25

expense ratio = 1% = 0.01

Net assets value per share at the end of the year = ($ 400 - ($ 400 * 0.01)) million / 15 million = $ 26.4

rate of return on fund = ($ 26.4 - $25 + $ 2 + $ 0.25) / $ 25 * 100 = 14.6 %