Exercise
Answer the following questions.
1. Which statement is true regarding NAV per share?
A. NAV is the amount an investor will pay for her shares in a mutual fund.
B. NAV is used to determine breakpoints.
C. NAV is calculated just before the markets open on trading days.
D. NAV represents the current value of a mutual fund share.
2. If NAV is $10 and the sales charge is 5%, what is POP? (Round to 2 decimal places.)
3. What classes of shares are sold at NAV with no up-front load?
I. A shares
II. B shares
III. C shares
IV. D shares
A. I and IV
B. II and III
C. I and III
D. III and IV
4. Distribution fees may also be known as:
I. Fees paid for marketing and selling fund shares, such as advertising, printing, and mailing
II. Front-end fees
III. 12b-1 fees
IV. Management fees
A. II and IV
B. I and III
C. I and IV
D. II and III
Answers
1. D. NAV is calculated after the close of trade each trading day.
2. $10.53. Formula: NAV = POP × (100% – sales charge %)
$10 = POP × (1.00 – 0.05) (changing the percentages to decimals)
$10 = POP × 0.95
$10 / 0.95 = POP (the result of dividing each side of the equation by 0.95)
$10.53 = POP
3. B. B shares and