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Consider a mutual fund with $300 million in assets at the start of the year and 12 million shares outstanding. If the gross return on assets is 18% and the total expense ratio is 2% of the year-end value, what is the rate of return on the fund?

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Answer:

The rate of return on the fund 15.64%

Explanation:

300 x 1.18 = 354

354 x 0.02 = 7.08

354- 7.08 = 346.92

346.92/300 = 15.64%

The rate of return on the fund 15.64%

  • Rate of return on the shares = 18 % - 2 %(100+18)
  • Rate of return on the shares = 18 - 2.36 % = 15.64 %

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