A mutual fund has a load of 4 percent and a net asset value (NAV) of $20 per share. What must an investor pay to purchase 250 shares? A) $5,200. B) $4,800. C) $5,208. D) $5,013. Your answer: A was incorrect. The correct answer was C) $5,208. Explaination they have give ins OP = $20/0.96 = $20.83 x 250 = $5,208 My question why can’t we have it this way Payment = $20 * 250 * (1.04) = $5,200 OP = $20 = $20.83 x 250 = $5,208 .96
Because the answer given is more logicac since you net off the load from the NAV, hence the calculation (1-0,04)=0.96
IMO, many of these Level 1 CFA exam questions have a bit of a twist or small trick to them… and if I get an answer from just multiplying a couple of given numbers together and that answer is one of my selections, I almost always think “this was too easy and must not be right”. That is just how I do things though.
I think if you do the division way, you rob investor more than what you would have done with your multiplication method. Another instance how MF charges are high for investors. S