From Qbank. I got the right answer but did it wrong, don’t know why…
An investor is contemplating buying a load fund versus a no load mutual fund. She is trying to figure out the actual amount she will have to spend on the load fund. The shares have a net asset value (NAV) of $34.50 and a load of 5.2%. Determine which type of fund will always have a share price equal to the NAV and the price she will pay for the load fund.
Fund Offering Price A) open-end $36.39 B) open-end $34.50 C) close-end $36.39
Your answer: A was correct!
The share price of an open-end fund will always equal the NAV, since the investment company is obligated to redeem shares at any time at current market value.
Offering price = $34.50 / (1 – 0.052) = $36.39.
Word for word from Schweser, “All mutual funds charge a fee for the ongoing management of the portfolio assets, which is expressed as a percenage of net asset value of the fund.”
So, based on that, I figured the price would be 34.5*(1.052)=36.29 (so I guessed the 36.39 answer). Why do they divide the load out?