Q From Schweser Bob, manages money for high net worth client. He makes the following statement: *Statement 1 The Redemption fees charged by mutual fund provide an incentive for portfolio managers *Statement 2 Trading Expenses and Management fees are reflected in the Net Asset Value (NAV) calculation A - Both Statements are Correct B - Both Incorrect C - Stmt 1 Correct, Stmt 2 Incorrect D - Stmt 1 Incorrect, Stmt Correct I thought neither one was correct. But the answer is D … could someone explain why?
trading expenses and management fees are considered operating expenses and NAV = Assets - Operating Expenses.
The expense ratio is the ratio of total expenses in the fund’s average total assets. Considering NAV = (Mkt value of fund assets - liabilities)/ # of fund shares outstanding, expenses would be included in the NAV
Thanks, got it 