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please answers all parts of the question. All! thanks. Question 2 (30 marks) a) At the beginning of the year, the net asset value (NAV)
please answers all parts of the question. All! thanks.
Question 2 (30 marks) a) At the beginning of the year, the net asset value (NAV) per share of Mutual Fund A, an open-end fund, is $2.50. The following information relates to the expenses charged by Mutual Fund A: Front-end load 12b-1 fees Expenses ratio 4% 0.8% 0.5% Calculate the rate of return to an investor in Mutual Fund A at the end of the year if Mutual Fund A made a gross rate of return of 18% and assuming no further transaction costs incurred in selling the shares. (10 marks) b) Fund B is a closed-end fund and has the same NAV per share as Mutual Fund A both at the beginning and at the end of the year. At the beginning of the year, the fund was selling at a 2% discount to NAV. By the end of the year, the fund is still selling at 2% discount to NAV but also incurs a transaction cost of 2% of sales proceeds. i. Calculate the rate of return to an investor in the Fund B during the year. (6 marks) ii. What might be the reason for the differences in the rate of return to an investor from Fund A and B? (4 marks) c) Who would be better to buy mutual funds instead of investing themselves and what should they look for when buying the mutual funds? (10 marks)Step by Step Solution
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