You pay $21,600 to the Laramie Fund, which has a NAV of $18 per share at the beginning of the year. The fund deducted a front-end load of 4%. The securities in the fund increased in value by 10% during the year. The fund's expense ratio is 1.3% and is deducted from year-end asset values. What is your rate of return on the fund if you sell your shares at the end of the year?

4.23%

Explanation:

Given

Investment = $21,600

Front-end load = 4%

Rate of return is calculated by:

End investment - Beginning investment / Beginning investment

First we calculate the available fund.

This is calculated as:

Available fund = Investment x (1 - Front-end load %)

Available Fund = $21,600 x (1 - 4%)

Available Fund = $21,600 * (1 - 0.04)

Available Fund = $20,736

Then we Calculate the number of shares.

This is given by;

Shares = Available Fund/NAV

Where NAV = $18 Per share

Shares = $20,736/$18 per share

Shares = 1,152 shares

The NAV end is then calculated.

This is calculated by;

NAV End = NAV Begining * (1 + Growth rate)

NAV End = $18 * (1+.10)

NAV End = $18 * 1.10

NAV End = $19.80

The Year end asset value is then calculated by

Assets Value = NAV end * number of shares

Assets Value = $19.80 x 1,152

Assets Value = $22,809.60

The end investment is also calculated by;.

End investment=year end asset value x (1 - expense ratio)

End Investment = $22,809.60 x (1-.013)

End Investment = $22,513.08

Lastly, End investment - Beginning investment / Beginning investment

= (22,513.08-21,600) / 21,600

=0.0423

= 4.23%