Friday 26 September 2014

An open-end fund has a net asset value of $11.40 per share. It is sold with a front-end load of 7%. What is the offering price?

An open-end fund has a net asset value of $11.40 per share. It is sold with a front-end load of 7%. What is the offering price? (Round your answer to 2 decimal places.)

  Offering price $   


Explanation:
The offering price includes a 7% front-end load, or sales commission, meaning that every dollar paid results in only $0.93 going toward the purchase of shares. Therefore:
 
Offering price =
NAV
=
$11.40
 = $12.26
1 − load 1 − 0.07

No comments:

Post a Comment