Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.60%

Question

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.60%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.40%. Assume the rate of return on both funds’ portfolios (before any fees) is 5% per year.

How much will an investment of $100 in each fund grow to after 1 year?

How much will an investment of $100 in each fund grow to after 2 years?

How much will an investment of $100 in each fund grow to after 11 years?

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.60%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.40%. Assume the rate of return on both funds’ portfolios (before any fees) is 5% per year.

Explanation / Answer

Year 1 Investment (a) Return@5% (b) 12b-1 fees@1% (c) expense ratio@0.40%(d) Front end load(e) Investment after year 1 (a+b-c-d-e) Loaded up fund 100 5 1 0.6 0 103.4 Economy Fund 100 5 0 0.4 2 102.6 Year 2 Investment (a) Return@5% (b) 12b-1 fees@1% (c) expense ratio@0.40%(d) Front end load(e) Investment after year 1 (a+b-c-d-e) Loaded up fund 103.4 5.17 1.034 0.6204 0 106.9156 Economy Fund 102.6 5.13 0 0.4104 2.052 105.2676 Loaded up fund Particulars Return 0.05 Expense ratio 0.006 12b-1 fees 0.01 Gain 0.034 Using excel Function = FV(rate, Nper, Pmt, PV) = FV(0.034,11,,-100) Future value $144.45 Economy Fund Particulars Return 0.05 Expense ratio 0.004 Front end Load 0.02 Gain 0.026 Using excel Function = FV(rate, Nper, Pmt, PV) = FV(0.026,11,,-100) Future Value $132.62

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.