11_Mutual Funds and Joint PDFs_sol

11_Mutual Funds and Joint PDFs_sol - BM HW #11 Multiple...

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BM HW #11 Multiple Choice 1. An open-end fund has a net asset value of $15.00 per share. It is sold with a front-end load of 4%. What is its offering price per share? A) 14.67 B) 15.63 C) 16.54 D) 17.87 2. All of the following are characteristic of hedge funds except A) Investors pay relatively high fees that depend on fund performance B) Funds are heavily regulated by the SEC C) Investors are often not allowed to sell back shares for long periods of time D) Wide use of short-sells 3. A money-market fund earns 5% per share annually, but also has an expense ratio of 50 basis points. The gross return you would earn on the fund each year is A) 104.5% E) 105.5% F) 103.5% G) 102.5% Free Response 1. BKM, chapter 4, #2 (page 111) P=10.70+.06*P P=10.70/(1-.06)=$11.38 2. BKM, chapter 4, #3 (page 112) NAV = offering price × (1 – load) = $12.30 ×0 .95 = $11.69 3. BKM, chapter 4, #19, (page 113). For part ( c ) assume the 12b-1 fee is in addition to the .5% annual expense ratio. Try part (c) at both the 2-year and 6-year investment horizon. a.
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This note was uploaded on 03/17/2011 for the course BUS M 410 taught by Professor Brianboyer during the Fall '10 term at BYU.

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11_Mutual Funds and Joint PDFs_sol - BM HW #11 Multiple...

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