Q:

An investor with 1,000 shares of the Amazing Growth fund places a redemption order for the shares before the close of the market on June 18th. In the financial pages of her local morning newspaper, dated June 21st, she sees the following information about her fund. BID: $15.00 -- ASK: $16.00. If the fund charges a 1% redemption fee, her redemption proceeds will be:
a) $14,850
b) $15,000
c) $15,840
d) $16,000

A:

The correct answer is a.
The investor placed her redemption order before the close of the market on Friday, so she will redeem at that day’s closing price. The morning newspaper for the following Monday will show Friday’s closing prices. The investor redeems at the BID (or NAV) next computed after the order is placed--forward pricing. The fund charges a 1% redemption fee, therefore: 1,000 shares × $15.00 = $15,000 × 1% = $150.00 redemption fee. $15, 000 - $150 = $14,850.


RELATED FAQS

  1. Why would an investor opt for a partial redemption as opposed to a full redemption?

    Learn about the difference between a partial redemption and a full redemption, and why an investor might choose to partially, ...
  2. When are mutual fund orders executed?

    Discover when and how mutual fund shares are bought and sold each day, and find out how price is determined and when the ...
  3. Can I sell mutual fund shares below their minimum intial purchase amount without ...

    Yes. You can freely buy and sell shares of a mutual fund regardless of any requirement for a minimal initial purchase amount ...
  4. Why would a company choose to repurchase in lieu of redeem?

    Learn the difference between a stock repurchase and a stock redemption, and find out about the reasons why a company might ...
  5. What is the difference between redemption of shares and repurchase of shares?

    Sometimes, shares of stock offered by a company are not regular, market-driven common shares. Instead, they may be preferred ...
RELATED TERMS
  1. Redemption Suspension

    A provision on a hedge fund preventing the withdrawal from the ...
  2. Redemption

    The return of an investor's principal in a fixed income security, ...
  3. Run On The Fund

    A situation in which a hedge fund faces an increasing amount ...
  4. Redemption Fee

    A fee collected by an investment company from traders practicing ...
  5. Extraordinary Redemption

    A provision that gives a bond issuer the right to call its bonds ...
  6. Mandatory Redemption Schedule

    Specified dates when a bond issuer is required to redeem all ...
Hot Definitions
  1. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  2. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
  4. Border Adjustment Tax

    A tax levied on goods based on where they are sold – exported goods are exempt from tax; those imported and sold in the ...
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Blind Trust

    A trust in which the trustees have full discretion over the assets, and the trust beneficiaries have no knowledge of the ...
Trading Center