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Consider a no-load mutual fund with $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, and that the total expense ratio is 1%, what is the rate of return on the fund? 23.75% 11.19% The answer cannot be determined from the information given. 24.64%

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TomShelby

Answer:

rate of return: 23.75%

Explanation:

Net value of assets at the beginning:

200,000,000 / 10,000,000 = $10 per share

at year-end

250,000,000 less 1% expenses: 250,000,000 x (1 - 1%) = 247,500,000

247,500,000  / 11,000,000 = $22.5

Returns:

22.5 year-end- 20 beginning =  2.5 increase in assets.

income distributions 2

capital gain distributions .25 per share.

Total return: 24.75

Price at the beginning 20

Rate of return: 24.75/20 - 1 = 0,2375 = 23.75%

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