You purchased 4,400 shares in the New Pacific Growth Fund on January 2, 2016, at an offering price of $45.50 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 1 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 5 percent during 2016, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific Growth Fund is 1.05 percent, what is your total return from this investment? (Assume that the operating expense is netted against the fund’s return.)

Total return  is -2.24%

Explanation:

Calculation of the initial NAV

Initial NAV = Offering price * (1-% of front end load)

Initial NAV = $45.50 * (1 - 5%)

Initial NAV = $45.50 * 0.95

Initial NAV = $43.225

Calculation of the final NAV

Final NAV = Initial NAV * (1 + (Appreciation rate - Operating expenses ratio)

Final NAV = $43.225* (1 + (5% - 1.05%))

Final NAV = $43.225 * 1 + 0.0395

Final NAV = $43.225 * 1.0395

Final NAV = $44.9323875

Calculation of the sales proceeds per share

Sales proceeds per share = Final NAV * (1 - % of back end load)

Sales proceeds per share = $44.9323875 * ( 1 - 1%)

Sales proceeds per share = $44.483063625

Calculation of the total return

Total return = (Sales proceeds per share - Offering price) / Offering price

Total return = ($44.483063625 - $45.50) / $45.50

Total return = -2.24%

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