Question

The Holt fund has $500 million in assets, 80 million in debt and 15 million shares at the start of the year. At the end of the year, the fund has $600 million in assets, 40 million in debt and 16 million shares. During the year, investors received $0.80 in distributions per share. The total expense ratio is 0.4%, which is deducted at the end of the year. What is the rate of the return on the fund?
A. 38.54%
B. 27.32%
C. 35,14%
D. 25.81%
E. 34.79%

Answer 1

Answer:

B. 27.32%

Explanation:

First we need to calculate the Net asset value per share at the start and end of the year

NAV at the start of the year = ($500 million - $80 million) / 15 million shares = $28 per share

NAV at the end of the year = ($600 million - ( ($600 million x 0.004) + $40 million ) / 16 million shares = $34.85 per share

Return = (NAV at the end of the year - NAV at the start of the year + Distribution received) / NAV at the start of the year

Return = ( 34.85 - 28 + 0.8 ) / 28 = 0.2732 = 27.32%