Suppose an individual invests $23,000 in a load mutual fund for two years. The l

Question

Suppose an individual invests $23,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 2.7 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.58 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 7 percent each year paid on the last day of the year. If the investor reinvests the annual returns paid on the investment, calculate the annual return on the mutual funds over the two-year investment period. (Do not round intermediate calculations. Round your answer to 2 decimal places.(e.g., 32.16))

Suppose an individual invests $23,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 2.7 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.58 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 7 percent each year paid on the last day of the year. If the investor reinvests the annual returns paid on the investment, calculate the annual return on the mutual funds over the two-year investment period. (Do not round intermediate calculations. Round your answer to 2 decimal places.(e.g., 32.16))

Explanation / Answer

Initial investment amount               23,000 Upfront commission                     621 Net amount invested               22,379 Return at the end of year 1                 1,567 Total value of investment at the end of year 1               23,946 Operating expenses for year 1                     139 Net amount available for investment for year 2               23,807 Return at the end of year 2                 1,666 Total value of investment at the end of year 2               25,473 Operating expenses for year 2                     148 Net amount available at the end of year 2               25,325 Annual return over 2 year period 10.11%

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