How is the Public Offering Price (POP) calculated?

How is the Public Offering Price (POP) calculated?

• A. NAV / (100% - Sales Charge %)
• B. NAV + Sales Charge
• C. NAV * (1 + Sales Charge %)
• D. NAV - Sales Charge

Answer: (A)

The Public Offering Price (POP) is calculated by taking the Net Asset Value (NAV) of a mutual fund and adjusting it to account for the sales charge, which is typically a percentage of the NAV. This adjustment is necessary because investors purchasing mutual fund shares generally have to pay a sales charge, also known as a load, on top of the NAV. The formula used to calculate the POP is NAV divided by (100% minus the Sales Charge percentage). This approach ensures that the final price reflects the amount the investor needs to pay to purchase the shares, including the sales charge. For example, if a fund has an NAV of $10 and a sales charge of 5%, the POP would be calculated as $10 / (100% - 5%) = $10 / 0.95 = approximately $10.53. This reflects the total amount an investor would pay per share, incorporating the required sales charge. This method contrasts with other potential calculations, which either add or multiply the sales charge in ways that do not correctly reflect the total cost to the investor when purchasing shares at the POP. Therefore, the use of the formula NAV / (100% - Sales Charge %) ensures that the sales charge is effectively included in the offering price

The Public Offering Price (POP) is calculated by taking the Net Asset Value (NAV) of a mutual fund and adjusting it to account for the sales charge, which is typically a percentage of the NAV. This adjustment is necessary because investors purchasing mutual fund shares generally have to pay a sales charge, also known as a load, on top of the NAV.

The formula used to calculate the POP is NAV divided by (100% minus the Sales Charge percentage). This approach ensures that the final price reflects the amount the investor needs to pay to purchase the shares, including the sales charge.

For example, if a fund has an NAV of $10 and a sales charge of 5%, the POP would be calculated as $10 / (100% - 5%) = $10 / 0.95 = approximately $10.53. This reflects the total amount an investor would pay per share, incorporating the required sales charge.

This method contrasts with other potential calculations, which either add or multiply the sales charge in ways that do not correctly reflect the total cost to the investor when purchasing shares at the POP. Therefore, the use of the formula NAV / (100% - Sales Charge %) ensures that the sales charge is effectively included in the offering price