Question

lutual Funds & Other Investment Companies i Help Save The New Fund had average daily assets of $2.8 billion in the past year. New Fund's expense ratio was 1.7% and the management fee was 1.5% a. What were the total fees paid to the fund's investment managers during the year? (Enter your answer in millions rounded to 2 decimal places.) Total fees paid million b. What were the other administrative expenses? (Enter your answer in millions rounded to 2 decimal places.) Other administrative expenses million < Prev 14 of 15 HII Next > 16

Answer 1

Expense ratio = total operating expenses/ average daily assets

Management expense ratio is the amount of an expense which has to be paid to the investment managers for the management (selling and buying) of assets.

a)

Total fees paid to investment manager = Management Expense ratio * average daily assets

Total fees paid to investment manager = 1.5% * $2.8 billion = 0.015 * 2,800,000,000 = $42,000,000 = $42 million

Total fees paid to investment manager = $42 million

b)

As the management expenses is 1.5% and total expenses ratio is 1.7%. the other expenses ratio = 1.7-1.5 = 0.2%

Other administrative expenses = 0.2% * $2.8 billion = 0.002* 2,800,000,000 = $5,600,000 = $5.6 million

Other administrative expenses = $5.6 million