Question

Mutual fund cost: Dividends = $3.00, capital gains distribution = $1.50, increase in NAV from $44.60 to $46.60.

A. What is percent return with no load? B. What is percent return with a 4% load?

Answer 1

Calculation of return on mutual funds when no load is given

S.No	Particulars	Amount
A	Dividend	$3.00
B	Opening NAV	$44.60
C.	Closing NAV	$46.60
D	Change in NAV ( C-B)	$2.00
E	Capital gains	$1.50
F	Total gains ( A+D+E)	$6.50

Calculation on return on investment

Return on investment =( Dividend + Capital gains+Closing NAV-Opening NAV)/Opening NAV

= ( $ 3+$ 1.5+$ 46.60-$ 44.60)/$ 44.60

= 14.57%

Part B: Alternative 1- When there is only entry load

Calculation of return on mutual funds when there is entry load @ 4%

Particulars	Amount
Opening NAV	$44.60
Entry load @ 4% (    ($ 44.60*0.04)	$1.784
Mutual fund can be purchased at	$46.384

Return on investment =( Dividend + Capital gains+Closing NAV-Opening NAV)/Opening NAV

= ( $ 3+$ 1.5+$ 46.60-$ 46.384)/$ 46.384

= 10.16%

Alternative 2: When there is exit load

Calculation of return on mutual funds when there is exit load @ 4%

Particulars	Amount
Closing NAV	$46.60
Exit load @ 4% ( $ 46.60*0.04)	$1.86
Mutual fund can be sold at	$44.736

Return on investment =( Dividend + Capital gains+Closing NAV-Opening NAV)/Opening NAV

=  ( $ 3+$ 1.5+$ 44.736-$ 44.6)/$ 44.6

=  10.3946%

Alternative 3: Load on both entry $ exit

Particulars	Amount
Opening NAV	$44.60
Entry load @ 4% (    ($ 44.60*0.04))	$1.784
Mutual fund can be purchased at	$46.384

Particulars	Amount
Closing NAV	$46.60
Exit load @ 4% ( $ 46.60*0.04)	$1.86
Mutual fund can be sold at	$44.736

Return on investment =( Dividend + Capital gains+Closing NAV-Opening NAV)/Opening NAV

= $3+$ 1.5+$ 44.736-$ 46.384)/$ 46.384

= 6.1486%