1
Industry Ethics
Strayer University
FIN550
, 2
Industry Ethics
17-3
Consider the recent performance of the Closed Fund, a closed-end fund devoted to finding
undervalued, thinly traded stocks:
Period NAV Premium / Discount
0 $10.00 0.0%
1 $11.25 -5.0%
2 $9.85 2.3%
3 $10.50 -3.2%
4 $12.30 -7.0%
The price premiums and discounts are indicated by pluses and minuses, respectively, and
Period 0 represents Closed Fund's initiation date.
a. Calculate the average return per period for an investor who bought 100 shares of the Closed
Fund at the initiation and then sold her position at the end of Period 4. =100*(12.30-10) =230
b. What was the average periodic growth rate in NAV over that same period? Average growth rate:
(12.30-10)/5 = 0.46
c. Calculate the periodic return for another investor who bought 100 shares of Closed Fund at
the end of Period 1 and sold his position at the end of Period 2. =(9.85-11.25)*100==140
d. What was the periodic growth rate in NAV between Periods 1 and 2? =12.5% from 10 to 11.25.
17-4
CMD Asset Management has the following fee structure for clients in its equity fund
Answer A
Fees on 27 Million
First $5,000,000 fees@1% $50,000
Next $5,000,000 fees@0.75% $37,500
Next $10,000,000 fees@0.60% $60,000
Next $7,000,000 fees@0.40% $28,000
Total Fees $175,500
Fees on 97 million
Industry Ethics
Strayer University
FIN550
, 2
Industry Ethics
17-3
Consider the recent performance of the Closed Fund, a closed-end fund devoted to finding
undervalued, thinly traded stocks:
Period NAV Premium / Discount
0 $10.00 0.0%
1 $11.25 -5.0%
2 $9.85 2.3%
3 $10.50 -3.2%
4 $12.30 -7.0%
The price premiums and discounts are indicated by pluses and minuses, respectively, and
Period 0 represents Closed Fund's initiation date.
a. Calculate the average return per period for an investor who bought 100 shares of the Closed
Fund at the initiation and then sold her position at the end of Period 4. =100*(12.30-10) =230
b. What was the average periodic growth rate in NAV over that same period? Average growth rate:
(12.30-10)/5 = 0.46
c. Calculate the periodic return for another investor who bought 100 shares of Closed Fund at
the end of Period 1 and sold his position at the end of Period 2. =(9.85-11.25)*100==140
d. What was the periodic growth rate in NAV between Periods 1 and 2? =12.5% from 10 to 11.25.
17-4
CMD Asset Management has the following fee structure for clients in its equity fund
Answer A
Fees on 27 Million
First $5,000,000 fees@1% $50,000
Next $5,000,000 fees@0.75% $37,500
Next $10,000,000 fees@0.60% $60,000
Next $7,000,000 fees@0.40% $28,000
Total Fees $175,500
Fees on 97 million
