Use the information in the table below to answer the following question.
| Name of Fund | NAV | Offer Price |
| :----------- | :------ | :---------- |
| Upton Group | $18.47 | $18.96 |
| Green Energy | $17.29 | $18.01 |
| TJH Small-Cap| $18.43 | $19.05 |
| WHI Health | $20.96 | NL |
For which of the funds shown would you pay the most commission on the purchase of 100 shares?
A. Green Energy
B. TJH Small-Cap
C. Upton Group
D. WHI Health
Answer (2)
Calculate the commission for Upton Group: 100 × ( $18.96 − $18.47 ) = $49.00 .
Calculate the commission for Green Energy: 100 × ( $18.01 − $17.29 ) = $72.00 .
Calculate the commission for TJH Small-Cap: 100 × ( $19.05 − $18.43 ) = $62.00 .
WHI Health has no commission. Green Energy has the highest commission: G ree n E n er g y .
Explanation
Understanding the Problem We are asked to determine which fund would result in the highest commission paid when purchasing 100 shares. The commission is the difference between the offer price and the net asset value (NAV).
Calculating Upton Group Commission First, let's calculate the commission for Upton Group. The offer price is $18.96 and the NAV is $18.47 . The commission per share is $18.96 − $18.47 = $0.49 . For 100 shares, the total commission is 100 × $0.49 = $49.00 .
Calculating Green Energy Commission Next, let's calculate the commission for Green Energy. The offer price is $18.01 and the NAV is $17.29 . The commission per share is $18.01 − $17.29 = $0.72 . For 100 shares, the total commission is 100 × $0.72 = $72.00 .
Calculating TJH Small-Cap Commission Now, let's calculate the commission for TJH Small-Cap. The offer price is $19.05 and the NAV is $18.43 . The commission per share is $19.05 − $18.43 = $0.62 . For 100 shares, the total commission is 100 × $0.62 = $62.00 .
Calculating WHI Health Commission Finally, WHI Health has 'NL' listed as its offer price, which means 'No Load'. This indicates that there is no commission charged for this fund, so the commission is $0 .
Comparing Commissions Comparing the commissions for 100 shares, we have:
Upton Group: $49.00
Green Energy: $72.00
TJH Small-Cap: $62.00
WHI Health: $0.00 The highest commission is $72.00 , which is for Green Energy.
Final Answer Therefore, you would pay the most commission for Green Energy.
Examples
Understanding commissions is crucial when investing in funds. For instance, if you're investing for retirement, knowing the commission helps you calculate the actual cost of your investment and its potential impact on your returns over time. Choosing funds with lower commissions can significantly increase your long-term investment gains, especially when making regular contributions. This is similar to understanding the fees associated with different bank accounts or credit cards, ensuring you make informed financial decisions.
The fund with the highest commission for purchasing 100 shares is Green Energy, with a total commission of $72.00 calculated from the difference between its offer price and NAV. The commissions for other funds are lower, making Green Energy the option with the greatest cost to investors in this scenario.
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