Question

The New Fund had average daily assets of \(2.2 billion in the past year. The fund sold \)400 million and purchased $500 million worth of stock during the year. What was its turnover ratio?

Short answer

18.2%

Step-by-step solution

Definition

In simple words, the term ‘turnover’ is used to indicate the total sales made in a particular business year.

Calculation of turnover ratio

The excess of purchases over sales must be due to new inflows into the fund.

Therefore, $400 million of stock previously held by the fund was replaced by new holdings.

So turnover is

$400/$2,200

= 0.182 or 18.2%