Calculating the Purchase Cost of a Mutual Fund with a Load

Explanation

To calculate the amount an investor must pay to purchase shares of a mutual fund with a load and a given net asset value (NAV), you need to consider the load fee and the cost of the shares.

In this case, the load fee is stated as 4 percent, which means the investor must pay 4 percent of the total investment amount as a fee. The net asset value (NAV) is given as $20 per share.

To calculate the load fee, you multiply the total investment amount by the load fee percentage:

Load Fee = Total Investment Amount × Load Fee Percentage

The total investment amount can be calculated by multiplying the number of shares by the NAV:

Total Investment Amount = Number of Shares × NAV

Given that the investor wants to purchase 250 shares and the NAV is $20, we can calculate the total investment amount:

Total Investment Amount = 250 × $20 = $5,000

Now we can calculate the load fee:

Load Fee = $5,000 × 0.04 = $200

Finally, to determine the total amount the investor must pay, we add the load fee to the total investment amount:

Total Amount = Total Investment Amount + Load Fee = $5,000 + $200 = $5,200

Therefore, the correct answer is A. $5,200.