PROBLEMS (p. 454)
1. Given the following information, calculate the net asset value for the Boston Equity mutual fund:
Net asset value = $20 per share
2. The Western Capital Growth mutual fund has
Total assets: $750,000,000
Total liabilities: $7,200,000
Total number of shares: 24,000,000
What is the fund’s net asset value (NAV)? (LO13.1)
Net asset value = $30.95 per share
3. Jan Throng invested $24,000 in the Invesco Charter Mutual Fund. The fund charges a 5.50 percent
commission when shares are purchased. Calculate the amount of commission Jan must pay. (LO13.1)
Ms. Throng must pay $1,320 for commissions.
4. As Bart Brownlee approached retirement, he decided it the time had come to invest some of his nest
egg in a conservative fund. He chose the Franklin Utilities fund. If he invests $110,000 and the fund
charges a 4.25 percent load when shares are purchased, what is the amount of commission that Bart must
pay? (LO13.1)
Mr. Brownlee must pay $4,675 for commissions.
5. Mary Canfield purchased the New Dimensions Global Growth fund. This fund doesn’t charge a frontend load, but it does charge a contingent deferred sales load of 5 percent for any withdrawals during the
first five years. If Mary withdraws $9,000 during the second year, how much is the contingent deferred
sales load? (LO13.1)
Ms. Canfield must pay a $450 contingent deferred sales load.
6. The value of Mike Jackson’s shares in the New Frontiers Technology fund is $11,400. The
management fee for this particular fund is 0.80 percent of the total asset value. Calculate the management
fee Mike must pay this year. (LO13.1)
Mr. Jackson must pay a $91.20 management fee this year.
7. Betty and James Holloway invested $52,000 in the Financial Vision Social Responsibility fund. The
management fee for this fund is 0.60 percent of the total asset value. Calculate the management fee the
Holloways must pay. (LO13.1)
Mr. and Mrs. Holloway must pay a $312 management fee this year.
8. As part of his 401(k) retirement plan at work, Ken Lowery invests 5 percent of his salary each month
in the Capital Investments Lifecycle fund. At the end of the year, Ken’s 401(k) account has a dollar value
of $21,800. If the fund charges a 12b-1 fee of 0.75 percent, what is the amount of the fee? (LO13.1)
Mr. Lowery must pay a $163.50 12b-1 fee this year.
9. When Jill Thompson received a large settlement from an automobile accident, she chose to invest
$146,000 in the Vanguard 500 Index fund. This fund has an expense ratio of 0.17 percent. What is the
amount of the fees that Jill will pay this year? (LO13.1)
Ms. Thompson must pay a total of $248.20 for fees for her mutual fund investment this year.
10. The Yamaha Aggressive Growth fund has a 1.83 percent expense ratio. (LO13.1)
a. If you invest $55,000 in this fund, what is the dollar amount of fees that you would pay this year?
As an investor, you must pay a total of $1,006.50 for fees this year.
b. Based on the information in this chapter and your own research, is this a low, average, or high expense
ratio?
This is an above average expense ratio. Many financial planners recommend that you choose a mutual
fund with an expense ratio of 1 percent or less.
11. Jason Mathews purchased 250 shares of the Hodge & Mattox Energy fund. Each share cost $14.15.
Fifteen months later, he decided to sell his shares when the share value reached $16.90. (LO13.4)
a. What is the amount of his total initial investment?
Mr. Mathew’s total investment is $3,537.50.
b. What was the total amount Mr. Mathews received when he sold his shares in the Hodge & Mattox
fund,
Mr. Mathews received $4,225.
c. How much profit did he make on his investment?
Mr. Mathews profit earned $687.50 profit.
12. Three years ago, James Matheson bought 200 shares of a mutual fund for $24 a share. During the
three-year period, he received total income dividends of 0.70 per share. He also received total capital
gain distributions of $0.80 per share. At the end of three years, he sold his shares for $28 a share. What
was his total return for this investment? (LO13.4)
Mr. Matheson’s total return for this investment was $1,100.
13. Assume that one year ago, you bought 100 shares of a mutual fund for $33 a share, you received a
$0.55 per-share capital gain distribution during the past 12 months, and the market value of the fund is
now $38 a share. (LO13.4)
a. Calculate the total return for your $3,300 investment.
Total return for this investment was $555.
b. Calculate the percentage of total return for your $3,300 investment.
The percentage of total return is 16.8 percent.
14. Over a four-year period, LaKeisha Thompson purchased shares in the Oakmark I Fund. Using the
following information, answer the questions that follow. You may want to review the concept of dollar
cost averaging in Chapter 12 before completing this problem. (LO13.4)
Year
Investment Amount
February 2008
$1,500
February 2009
$1,500
February 2010
$1,500
February 2011
$1,500
*Carry your answer to 2 decimal places
Price Per Share
$40.00`
$30.00
$34.40
$42.00
Number of Shares*
37.50
50.00
43.60
35.71
a. At the end of four years, what is the total amount invested?
At the end of four years, Ms. Thompson has invested $6,000.
b. At the end of four years, what is the total number of shares purchased?
At the end of four years, Ms. Thompson purchased 166.81 shares.
c. At the end of four years, what is the average cost for each share?
At the end of four years, the average cost for each share is $35.97.
15. During one three month period Matt Roundtop’s mutual fund grew by $6,000. If he withdraws 35
percent of the growth, how much will he receive? (LO13.4)
The amount Mr. Roundtop will receive is $2,100.
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Chapter 13