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7 Jan 2018

1. What are the various types of redemptions of fund shares? If a fund shareholder wants cash quickly from a redemption, what would you recommend?

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Irving Heathcote
Irving HeathcoteLv2
7 Jan 2018
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Related questions

You purchased 4,600 shares in the New Pacific Growth Fund onJanuary 2, 2016, at an offering price of $34.20 per share. Thefront-end load for this fund is 5 percent, and the back-end loadfor redemptions within one year is 3 percent. The underlying assetsin this mutual fund appreciate (including reinvested dividends) by7 percent during 2016, and you sell back your shares at the end ofthe year. If the operating expense ratio for the New Pacific GrowthFund is 1.03 percent, what is your total return from thisinvestment? (Assume that the operating expense is nettedagainst the fundҀ™s return.) (A negative value shouldbe indicated by a minus sign. Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces.)

Total return %

You purchased 5,400 shares in the New Pacific Growth Fund on January 2, 2010, at an offering price of $63.90 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 2 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 6 percent during 2010, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific Growth Fund is 1.05 percent, what is your total return from this investment? Assume that the annual expense ratio is netted out of the fund's return. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Total return %

Stock Redemptions

For this assignment, read the scenario below and then evaluate the impact of the stock redemption.

Adams, Inc. is a family-owned business that has one class of stock. There are 600 shares allocated equally to Al Adams, Bev Adams, Curt Adams, Derek Adams, Elroy Adams and Fred Murray. Fred is not related to the Adams family. He would like to sell has shares back to Adams, Inc. Fred's shares have a FMV of $200,000 and a tax basis of $50,000. The redemption is planned for December 31.

- Is it possible to determine if there will be a dividend or capital gain from the information provided? If so, calculate it. If not, what information would you need?

- Would this transaction meet the three IRS change in stock ownership tests? Explain each test and the results.

- Under what circumstances would Fred be deemed to have constructive ownership of more than 100 shares?

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