Asked by Victoria Konko on Jun 10, 2024
Verified
You pay $216,000 to the Capital Hedge Fund, which has a price of $18 per share at the beginning of the year. The fund deducted a front-end commission of 4%. The securities in the fund increased in value by 15% during the year. The fund's expense ratio is 2% 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?
A) 5.35%
B) 7.23%
C) 8.19%
D) 10%
Front-end Commission
A fee paid when purchasing shares of a mutual fund, upfront, which reduces the amount invested from the start.
Expense Ratio
The annual fee that all funds and exchange-traded funds charge their shareholders, expressed as a percentage of the fund's total assets.
Rate of Return
The gain or loss on an investment over a specified time period, expressed as a percentage of the investment's cost.
- Examine the return frameworks of hedge funds along with the influence of fees on their returns.
Verified Answer
EA
- 1 = 8.19%
Learning Objectives
- Examine the return frameworks of hedge funds along with the influence of fees on their returns.