A Mutual Fund's Net Asset Value Is $50, but the Fund

question 17

Essay

A mutual fund's net asset value is $50, but the fund charges an exit fee of 1 percent of net asset value and a load fee of 4 percent of net asset value. An individual purchases the shares. During the year the fund distributes $2.34. The net asset value rises to $58.38 and the investor redeems the shares.

a. What is the percentage return the fund can report that was achieved by its portfolio managers?

b. What is the percentage return the individual earned on the investment?

c. Why are the two percentages different?

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Definitions:

Total Cost Variance

The difference between the budgeted or standard cost of an activity and its actual cost.

Direct Labor

Costs associated with the employees who are directly involved in the production of goods or services, such as wages for factory workers.

Rate Variance

The difference between the actual rate paid for something and the standard or expected rate, often used in budgeting and cost management.

Time Variance

The variance between the real duration it takes to finish a task and the initially projected time for its completion.