Question

You purchased 1,700 shares of the New Fund at a price of $25 per share at the beginning of the year. You paid a front-end load of 2%. The securities in which the fund invests increase in value by 12% during the year. The fund's expense ratio is 1.9%. 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.)

Answer 1

Answer:

7.9%

Explanation:

Calculation to determine your rate of return on the fund if you sell your shares at the end of the year

First step is to determine the Cost of shares

Cost of shares =1700 x $25

Cost of shares= $42,500

Second step is to calculate the Total amount invested

Total amount invested=$42,500/(1-.02)

Total amount invested= $43,367

Third step is to calculate the Shares increase from $42,500 to...

Shares increase =$42,500(1.12-.019)

Shares increase=$42,500(1.101)

Shares increase= 46,793

Now let determine the Rate of Return

Rate of Return= (46,793 -$43,367)/$43,367

Rate of Return= $3,426/$43,367

Rate of Return= 0.079*100

Rate of Return=7.9%

Therefore your rate of return on the fund if you sell your shares at the end of the year is 7.9%