How to Calculate Shares Received in an Open-Ended Fund with a Sales Charge

Shares Calculation for Open-Ended Fund with Sales Charge

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Question

The NAV of an open-ended fund is $16.88. The fund charges a 7.2% sales charge and no redemption charges. If you invested a $1,000 with the fund, how many shares would you receive?

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A. B. C. D.

C

The offer price i.e. the price at which you can buy a share equals

NAV/(1-load charge) = 16.88/(1-0.072) = $18.19. Therefore, the number of shares you receive equals 1000/18.19 = 54.98

Be careful NOT to calculate the offer price as NAV*(1 + load charge). The sales charge is expressed as an percentage of the amount you deposit. In this example, you deposit $1,000 and get shares worth $1,000 * (1-0.072) = $928. Note that the 54.98 shares are worth 54.98 * 16.88 = $928 i.e. this is the amount you would get if you were to sell the shares immediately.

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