Mutual funds

Explain why the offer price is used to calculate the investment in a load mutual fund instead of the net asset value.

When purchasing load mutual funds, you are charged a fee, or commission, which is added to the fund's net asset value. The total of the net asset value and the commission, called the offer price, is the price you actually pay for each share of the fund.

You are a financial advisor with a client who purchased 100 shares of stock in a fund with a net asset value of $21.30 and an offer price of $21.45. Your client wants to make $20 per share on the stock when it is sold. The client calls you to find out why you have not sold the shares today, because they saw the stock listed with a net asset value of $41.30 and an offer price of $41.45. Explain to your client why you have not sold the shares.

You paid the offer price of $21.45 per share for your stock, and you can sell it for its net asset value of $41.30 per share. That is a profit of only $19.85 per share, which is not the $20 per share you want to get.

An investor buys 400 shares of stock in a fund when the net asset value is $23.79 and the offer price is $23.89. The investor sells these shares when the net asset value is $50.34 and the offer price is $50.46. Determine the amount of profit the investor earns. a. $10,580 b. $10,620 c. $10,628 d. $20,136

a

What were Nyromi's proceeds? a. $4,617.50 b. $4,685.00 c. $4,470.50 d. $4,740.00

a

Salazar made an investment in 140 shares of stock in a no-load fund for $2,993.20. After one year the stock had a net asset value of $24.53 per share. If Salazar redeems all 140 shares, which of the following is a correct statement? a. Salazar will have a loss of $441. b. Salazar will have a profit of $441. c. Salazar will have a profit of $3,434.20. d. There is not enough information to calculate profit or loss.

b

The net asset value of stock in a mutual fund had increased by $20 per share when an investor decided to redeem them. The investor had purchased 100 shares of the stock for $2,316 and redeemed them for $4,301. What can you conclude about the fund? a. The fund is a no-load fund. b. The offer price of the fund was $0.15 less than the net asset value when purchased. c. The offer price of the fund was $0.15 more than the net asset value when purchased. d. The offer price of the fund was $0.15 more than the net asset value when sold.

c

Which of the following expressions is equal to the total investment of a no-load mutual fund? a. net assets ÷ number of shares b. net asset value ÷ number of shares c. net asset value x number of shares d. offer price x number of shares

c

Nezzie plans to sell all of her shares when she can profit $5,000. What must the net asset value be in order for Nezzie to sell? a. $16.67 b. $33.25 c. $33.57 d. $33.66

d

Phillipe buys 50 shares of Green Energy and 120 shares of TJH Small-Cap. What is Phillipe's total investment? a. $3,076.10 b. $3,112.10 c. $3,150.50 d. $3,186.50

d

If a mutual fund has net assets of $294,000 and 16,800 shares, then each share has a net asset value of $17.50.

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