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Investments Exam #2: Chapters: 4 and 5
Exam Questions With Verified Answers
An open-end fund has a net asset value of $10.70 per share. It is sold with a front-end load of
6%. What is the offering price? - answer✔$11.38
Offering price= NAV / (1-load)
NAV= 10.70
Load= 6%
10.70 / (1-0.06)
= 11.38
If the offering price of an open-end fund is $12.30 per share and the fund is sold with a front-end
load of 5%, what is its net asset value? - answer✔$11.69
offering price= NAV / (1-load)
12.30=NAV / (1-0.05)
12.30=NAV / (0.95)
12.30 x 0.95 = NAV
NAV= 11.69
The composition of the Fingroup Fund portfolio is as follows:
StockSharesPrice:
A 200,000 shares $35
B 300,000 shares $40
C 400,000 shares $20
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D 600,000 shares $25
The fund has not borrowed any funds, but its accrued management fee with the portfolio
manager currently totals $30,000. There are 4 million shares outstanding.
What is the net asset value of the fund? - answer✔$10.49
NAV= market value of assets - liabilities / shares outstanding
(35 x 200,000 + 40 x 300,000 + 20 x 400,000 + 25 x 600,000) = Total market value
TMV = 42,000,000
liabilities/fees= 30,000
42,000,000 - 30,000
= 4,000,000
shares outstanding= 4,000,000
NAV= (42,000,000 - 30,000) / (4,000,000)
NAV= 10.49
The composition of the Fingroup Fund portfolio is as follows:
StockShares and Price :
A: 200,000 shares $35
B: 300,000 shares $40
C: 400,000 shares $20
D: 600,000 shares $25
If during the year the portfolio manager sells all of the holdings of stock D and replaces it with
200,000 shares of stock E at $50 per share and 200,000 shares of stock F at $25 per share.
What is the portfolio turnover rate? - answer✔35.71%
Turnover rate = (dollar amount add or replaced / portfolio analysis)
*dollar amount add or replaced= whichever is less*
portfolio analysis= (200,000 x 35 + 300,000 x 40 + 400,000 x 20 + 600,000 x 25)
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portfolio analysis = 42,000,000
stock d: 600,000 x 25 = $15 million
stock ef: 200,000 x 50 + 200,000 x 25= $15 million
*whichever is less+
turnover rate = $15,000,000 / $42,000,000
turnover rate = 35.71
Consider a no-load mutual fund with $440 million in assets and 20 million shares at the start of
the year, and $490 million in assets and 21 million shares at the end of the year. During the year
investors have received income distributions of $3 per share, and capital gains distributions of
$0.30 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? - answer✔20%
Rate of return= (NAV 1 -NAV 0 + income and cap gain distribution) / (NAV 0)
NAV = market value assets - liabilities / shares outstanding
NAV 0= 440 m - m
NAV 0 = $22
NAV 1 = 490 m - 490 m x 0.01 % / 21 m
NAV 1= $23.1
income = $3
capital gain distribution = $0.30
$ 3 + $0.30 = $3.3
rate of return = (23.1 - 22 + 3.3) / ( 22)
rate of return = 4.
ROR = 20%
A mutual fund has total assets outstanding of $69 million. During the year the fund bought
$17.25 million worth of stocks and sold $20 million worth of stocks . What is the fund's turnover
rate? - answer✔25%
