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The New Fund had average daily assets of $3.2 billion in the past year. The fund sold $410 million a

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Business

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Homework

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Problem 4-24
You purchased 1,500 shares of the New Fund at a price of $20 per share at
the beginning of the year. You paid a front-end load of 5%. The securities in
which the fund invests increase in value by 14% during the year. The fund's
expense ratio is 1.7%. What is your rate of return on the fund if you sell your
shares at the end of the year? (Do not round intermediate calculations.
Round your answer to 2 decimal places.)
Rate of return
%
Explanation:
Because the 5% load was paid up front and reduced the actual amount
invested, only 95% (1.00 − 0.05) of the contribution was invested. Given the
value of the portfolio increased by 14% and the expense ratio was 1.7%, we
can calculate the end value of the investment against the initial contribution:
1 + r = 0.95 × (1 + 0.14 − 0.017) = 1.0669
Thus, the rate of return was: 1.0669 − 1 = 0.0669 = 6.69%
6.69 ± 1%

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