Question 2 :

a. Explain the benefits to investors of investing in mutual funds compared to making their own direct investment in stocks or bonds. (8 marks)

b. What are the key factors that will affect your choice of mutual fund(s) with front-end load or back-end load ? (4 marks)

c. A no-load mutual fund has $400 million assets, $50 million debts, and 15 million shares outstanding at the beginning of the year. At the end of the year, the fund has $500 million assets, $40 million debts, and 18 million shares outstanding. During the year, investors received dividends of $0.50 per share and a capital gain distribution of $0.30 per share. If the total expense ratio is 0.75% on the asset size, calculate the rate of return on this fund. (Show details of your calculation and write your final answer in 2 decimal places)

(8 marks)