Question 1

ABC Fund has an offer price of $21.60 and a front-end load of 2%. What is its net asset value per share?

Accepted Answer

The net asset value per share of the fund is calculated as follows:
NAV per share = Offer price - (Front-end load x Offer price)
             = $21.6 - (0.02 x $21.6)
             = $21.17
Therefore, the correct choice is A.

Question 2

A mutual fund has 2,000 shares of stock at a price of $70 and 6,000 shares of another stock at a price of $30. If the fund has an NAV of $17.10, how many shares of the mutual fund are outstanding?

Accepted Answer

The total value of the stocks is (2,000 * $70) + (6,000 * $30) = $140,000 + $180,000 = $320,000. The NAV is the total value of the fund divided by the number of shares outstanding. Therefore, $320,000 / $17.10 = 18,713 shares outstanding.

Question 3

A mutual fund has total net assets of $3.2 million and 150,000 shares. What as the NAV of the fund?

Accepted Answer

NAV (Net Asset Value) = Total Net Assets / Number of Shares
NAV = 3.2 million / 150,000 = $21.33
Therefore, the answer is option B.

Question 4

One year ago, you purchased 300 shares of a mutual fund that had a front-end load of 4%. The NPV at the time of purchase was $55.20. Today, the NAV (including all reinvested dividends) is $56.32 and the total expenses of the fund for the year were 1.65%. What was your return for the year?

Accepted Answer

The answer of One year ago, you purchased 300 shares...

Question 5

Balanced funds aim to: I) broaden diversification
II) provide current income
III) conserve principal
IV) maximize capital gains

Accepted Answer

Balanced funds aim to achieve all three objectives - broaden diversification, provide current income and conserve principal. Maximize capital gains is not the primary objective of balanced funds, although they may still pursue it. Therefore, options A and C are incorrect. Option B only addresses two out of the four objectives. Therefore, the best choice is option D - I, II and III.

Question 6

4 months ago, you purchased 800 shares of a mutual fund at an offering price of $46.50 a share. The find imposes a front-end load of 4% and has a total annual expense of 0.95%. The NPV of the fund today is $48.63. There were no fund distributions or dividends. What was your holding period return on this investment?

Accepted Answer

The initial investment per share after the front-end load is $46.50 * (1 - 0.04) = $44.64. The holding period return is calculated as [(Ending Price - Initial Price) / Initial Price] * 100 = [($48.63 - $44.64) / $44.64] * 100 = 8.93%. However, since the holding period is 4 months, the annualized return is (1 + 0.0893)^(12/4) - 1 = 0.0458 or 4.58%.

Question 7

You invested $3,000 in a mutual fund just slightly less than four years ago when the NAV of the fund was $12.50. Today, the NAV has risen to $15.40. Over the four years, you obtained an additional 31.52 shares by reinvesting your fund distributions. The fund has no front-end load, but charges a contingent deferred sales charges of 6% the first year with the percentage of the charge decreasing by 1% each year. How much money will you receive if you redeem your shares today?

Accepted Answer

First, we need to calculate the total number of shares you own today.

The initial investment of $3,000 divided by the NAV of $12.50 gives us:

$3,000 / $12.50 = 240 shares

Adding the 31.52 additional shares you obtained through reinvestment gives us:

240 + 31.52 = 271.52 shares

Now, we need to calculate the contingent deferred sales charge.

Since we are redeeming our shares after four years, the percentage charge is:

6% - (4 x 1%) = 2%

Therefore, the amount of the charge would be:

$15.40 x 2% x 271.52 shares = $832.36

The final redemption amount is then calculated as:

($15.40 x 271.52 shares) - $832.36 = $4,055.97

Therefore, the best choice is C, $4,055.97.

Question 8

A mutual fund has average daily assets of $150 million during the year. The fund had sales of $32 million and purchases of $43 million. What is the fund turnover?

Accepted Answer

The formula for turnover ratio is purchases + sales / average daily assets. 
Plug in the given values: 
$32 million + $43 million / $150 million = 0.21 
Therefore, the fund turnover is 0.21. The best choice is D.

Question 9

A mutual fund with a 4.5 percent front-end load has a NAV of $74.53. What is the offering price of the fund?

Accepted Answer

The offering price is calculated by dividing the NAV by (1 - front-end load). So, $74.53 / (1 - 0.045) = $78.04.

Question 10

A mutual fund has $840 million in assets and $40,000 in liabilities. There are 35 million shares outstanding. The fund charges a 5% front-end load. What is the offering price of the fund?

Accepted Answer

The net asset value (NAV) of the fund is calculated by subtracting the liabilities from the assets and then dividing by the number of shares outstanding. So, NAV = ($840,000,000 - $40,000) / 35,000,000 = $23.99. The offering price is then calculated by dividing the NAV by (1 - the front-end load percentage), so Offering Price = $23.99 / (1 - 0.05) = $25.26.

Question 11

A mutual fund with $5.4 million in assets has 250,000 shares outstanding. If the fund has liabilities of $420,000, what is the NAV of the fund?

Accepted Answer

The Net Asset Value (NAV) is calculated by subtracting the fund's liabilities from its assets and then dividing by the number of shares outstanding. So, NAV = ($5,400,000 - $420,000) / 250,000 = $4,980,000 / 250,000 = $19.92.

Question 12

A mutual fund has a NAV of $46.20 at the beginning of the year. The fund distributes a dividend of $0.32 and a capital gain of $0.87 at the end of the year. If you purchased 2,000 shares at the beginning of the year and the end of year NAV was $49.10, what was your return for the year?

Accepted Answer

The return is calculated as [(End NAV - Start NAV + Dividends + Capital Gains) / Start NAV] * 100. Here, [(49.10 - 46.20 + 0.32 + 0.87) / 46.20] * 100 = 8.85%.

Question 13

You invest $10,000 in a mutual fund at the beginning of the year at a NAV of $32.80. The fund makes a dividend distribution of $0.18 and a capital gains distribution of $0.38. If the NAV at the end of the year is $36.21, what was your return for the year?

Accepted Answer

The answer of You invest $10,000 in a mutual fund...

Question 14

A mutual fund has 10,000 shares of Stock D at a price of $34 and 15,000 shares of Stock E at a price of $41. The fund has liabilities of $87,000 and a NAV of $41.05. How many shares of the fund are outstanding?

Accepted Answer

The answer of A mutual fund has 10,000 shares of...

Question 15

A mutual fund with a NAV of $99.99 has a front-end load of 3 percent. What is the offering price of the fund?

Accepted Answer

The offering price of the fund is calculated as follows:
Offering price = NAV / (1 - front-end load)
= 99.99 / (1 - 0.03)
= $103.08
Therefore, the correct choice is C.

Question 16

A mutual fund has 4,000 shares of Stock A at a price of $45 and 6,000 shares of Stock B at a price of $35. If the fund has 20,000 shares outstanding, what is the NAV of the fund? Assume there are no liabilities for this fund.

Accepted Answer

The total market value of Stock A is 4,000 x $45 = $180,000
The total market value of Stock B is 6,000 x $35 = $210,000
The total market value of the fund is $180,000 + $210,000 = $390,000
The NAV of the fund is the total market value divided by the number of shares outstanding: $390,000 / 20,000 = $19.50. Therefore, the correct choice is B.

Question 17

A mutual fund has 40,000 shares of Stock A at a price of $38 and 60,000 shares of Stock B at a price of $46. If the fund has 95,000 shares outstanding and total liabilities of $130,000, what is the NAV of the fund?

Accepted Answer

To calculate the NAV, we need to first calculate the total value of the assets:
Total value of Stock A = 40,000 shares x $38 = $1,520,000
Total value of Stock B = 60,000 shares x $46 = $2,760,000
Total value of assets = $1,520,000 + $2,760,000 = $4,280,000

Next, we need to deduct the liabilities from the total value of assets:
Net asset value = (Total value of assets - Liabilities) / Number of outstanding shares
Net asset value = ($4,280,000 - $130,000) / 95,000
Net asset value = $4,150,000 / 95,000
Net asset value = $43.68

Therefore, the NAV of the fund is $43.68. Answer choice B is the correct option.

Question 18

A mutual fund has sales during the year of $86 million and purchases of $94 million. If the average daily assets of the fund were $110 million, what was the fund turnover?

Accepted Answer

Fund turnover = (Sales + Purchases) / Average daily assets

Fund turnover = ($86 million + $94 million) / $110 million

Fund turnover = $180 million / $110 million

Fund turnover = 1.64

Since we need the answer in terms of a percentage, we multiply by 100, which gives us 164%.

However, this is the turnover rate for the entire year. To get the turnover rate for a single day, we divide by 365.

Turnover rate per day = 1.64 / 365

Turnover rate per day = 0.0045

Finally, to get the turnover rate as a decimal, we multiply by 100, giving us 0.78. Therefore, the answer is (C) 0.78.

Question 19

A mutual fund holds three stocks. The number of shares of each stock is 12,000, 18,000, and 25,000, at a price of $64, $56, and $32, respectively. If the fund has liabilities of $160,000 and 115,000 shares outstanding, what is the NAV per share?

Accepted Answer

The answer of A mutual fund holds three stocks. The...

Question 20

You invested $2,000 in a mutual fund 20 months ago when the NAV of the fund was $18.90. You have not acquired or sold any shares since that time. Today, the NAV has risen to $19.40. The fund has no front-end load, but charges a contingent deferred sales charges of 5%, 5%, 4%, 3%, 2%, and 1% if the shares are redeemed within the first 6 years, respectively. How much money will you receive if you redeem your shares today?

Accepted Answer

First, we need to calculate the current value of the investment:

Number of shares purchased = $2,000 / $18.90 = 105.820

Current value of investment = 105.820 x $19.40 = $2,053.30

Next, we need to calculate the contingent deferred sales charge (CDSC):

Since we have held the shares for 20 months, only the first CDSC of 5% applies.
CDSC = 5% x $2,053.30 = $102.67

Finally, we subtract the CDSC from the current value of the investment to get the redemption value:

Redemption value = $2,053.30 - $102.67 = $1,950.26

Therefore, the best choice is B, which is $1,950.26.

Quiz 5: Mutual Funds