You purchased 2,400 shares in the New Pacific Growth Fund on January 2, 2016, at

Question

You purchased 2,400 shares in the New Pacific Growth Fund on January 2, 2016, at an offering price of $28.90 per share. The front- -ithin onad yo total ret 0 end load for this fund is 5 percent, and the back-end load for redemptions within one year is 1 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 6 percent during 2016, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific Growth Fund is 1.91 percent, what is your total return from this investment? (Assume that the operating expense is netted against the fund's return.) (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Total return

Explanation / Answer

Solution :- Purchase price per share = $ 28.90

Beginning net annual value (NAV) of fund = 28.90 * (1 - 0.05) = $ 27.455

Closing net annual value (NAV) of fund = 27.455 * [ 1 + (6 % - 1.91 %) / 100 ]

= 27.455 * [ 1 + 4.09 / 100 ]

= 27.455 * (1 + 0.0409)

= 27.455 * 1.0409

= $ 28.5779

Sales price per share = 28.5779 - 1 % of 28.5779

= 28.5779 - 0.285779

= $ 28.292121

Total return = (28.292121 - 28.90) / 28.90

= (-) 0.607879 / 28.90

= (-) 0.0210 i.e., (-) 2.10 %

Conclusion :- Total return = (-) 2.10 % (Negative sign indicates the loss.)

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