Corporate Fund started the year with a net asset value of $12.50. By year end, its NAV equaled $12.10. The fund paid year-end distributions of income and capital gains of $1.50. What was the rate of return to an investor in the fund? 8. A closed-end fund starts the year with a net asset value of $12.00. By year end, NAV equals $12.10. At the beginning of the year, the fund was selling at a 2% premium to NAV. By the end of the year, the fund is selling at a 7% discount to NAV. The fund paid year-end distributions of income and capital gains of $1.50. a. What is the rate of return to an investor in the fund during the year? b. What would have been the rate of return to an investor who held the same securities as the fund manager during the year? 9. What are some comparative advantages of investing in the following: a. Unit investment trusts. b. Open-end mutual funds. c. Individual stocks and bonds that you choose for yourself. 10. Open-end equity mutual funds find it necessary to keep a significant percentage of to- tal investments, typically around 5% of the portfolio, in very liquid money market as- sets. Closed-end funds do not have to maintain such a position in "cash-equivalent" securities. What difference between open-end and closed-end funds might account for their differing policies? 11. Balanced funds and asset allocation funds invest in both the stock and bond markets. What is the difference between these types of funds? 12. a. Impressive Fund had excellent investment performance last year, with portfolio re- turns that placed it in the top 10% of all funds with the same investment policy. Do you expect it to be a top performer next year? Why or why not? b. Suppose instead that the fund was among the poorest performers in its comparison group. Would you be more or less likely to believe its relative performance will per- sist into the following year? Why? 13. Consider a mutual fund with $200 million in assets at the start of the year and with 10 million shares outstanding. The fund invests in a portfolio of stocks that provides div- idend income at the end of the year of $2 million. The stocks included in the funds portfolio increase in price by 8%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 1%, which are deducted from port- folio assets at year-end. What is net asset value at the start and end of the year? What is the rate of return for an investor in the fund? 14. The New Fund had average daily assets of $2.2 billion in 2000. The fund sold $400 million worth of stock and purchased $500 million during the year. What was its turnover ratio? 15. If New Fundss expense ratio (see Problem 14) was 1.1% and the management fee was .7%, what were the total fees paid to the funds investment managers during the year? What were other administrative expenses? I. Introduction 4. Mutual Funds and Other Investment Companies The McGraw−Hill Companies, 2001