7) You have $20,000 that you invested in an open-end load fund that charged you

Question

7) You have $20,000 that you invested in an open-end load fund that charged you a front-end load of 7.2%. Over a one-year period, the fund's rate of return was 30%. Calculate the annual rate of return on your investment.

8) Sam Johnson owned 5,000 shares of the Argus Fund that was valued at $23 per share on January 1. During a one-year period, he was entitled to distributions of $2,720 in dividends and $6280 in capital gains, all of which were reinvested in the fund by purchasing new shares at an average price of $25 per share. Total operating expense was 1.25% of end-of-year NAV. By the end of the year, the fund’s price per share was $24. Calculate Sam’s rate of return on his investment in that year (ignore taxes)?

Explanation / Answer

7)

Net funds invested in investments:

= $20,000*(1-7.20%)

= $18,560

Annual rate of return on your investment:

= ($18,560*(1+30%)-$20,000)/$20,000

= 20.64%

Hence, Annual rate of return on your investment is 20.64%

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