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WiseGuy Capital mutual fund has $200 million in assets and 10 million shares at the start of the year and with $250 million in assets and 11 million shares at the end of the year. During the year investors have received income distributions of $2 per share and capital gain distributions of $.25 per share. Assuming that the fund carries no debt, does not charge any load, and the total expense ratio is 2%, what is the rate of return on the fund

Sagot :

Cricetus

Answer:

The return rate on the fund is "23.75%".

Explanation:

The given values are:

In the starting of the year,

Mutual fund assets,

= $200

Share,

= 10 million

In the end of the year,

Income distribution,

= $2 per share

Capital gain distribution,

= $.25 per share

Total expense ration,

= 2%

Now,

The initial NAV will be:

=  [tex]\frac{200mn}{10mn}[/tex]

=  [tex]20[/tex]$

The final NAV will be:

=  [tex]250-\frac{250\times 0.01}{11}[/tex]

=  [tex]22.5[/tex]

hence,

The return will be:

=  [tex]\frac{Change \ in \ NAV+Div+Capital \ gain \ distribution}{Initial \ NAV}[/tex]

On substituting the values, we get

=  [tex]\frac{22.5-20+2+0.25}{20}[/tex]

=  [tex]\frac{4.75}{20}[/tex]

=  [tex]0.2375[/tex]

i.e.,

=  [tex]23.75[/tex]%

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