Question

a) The following information relates to open-end Mutual Fund A:

	Value on 1/1/2019	Value on 31/12/2019
Total Assets	$200 million	$288 million
Total Liabilities	$100 million	$120 million
No. of shares outstanding	40 million	60 million

Interim dividends paid per share	$0.15
Front-end load	4%
12b-1 fees	0.8%
Expenses ratio	0.5%

Calculate the rate of return to an investor in the fund during the year, assuming all 12b-1 fees and fund expenses were paid before year-end.

b) Fund B is closed-end fund and has the same NAVs as Mutual Fund A on 1/1/2019 and 31/12/2019. At the beginning of the year, the fund was selling at a 2% discount to NAV. By the end of the year, the fund is selling at 3% premium to NAV. Brokerage commission and expenses ratio are 1.5% of sales proceeds. No interim dividends were declared.

Answer 1

Front End Load is a fee paid at the time of buying mutual fund units whereas Back End Load is paid at the time of selling mutual fund units.

Buying Price in case of Front End Load = NAV (1 + Front End Load)

Selling Price in case of Back End Load = NAV (1 - Back End Load)

For any query or clarification, please leave a comment.