Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.90%

Question

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.90%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.10%. Assume the rate of return on both funds’ portfolios (before any fees) is 8% per year.

a. How much will an investment of $100 in each fund grow to after 1 year? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Loaded-Up Fund $ 108.10 Economy Fund $

b. How much will an investment of $100 in each fund grow to after 5 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Loaded-Up Fund $ Economy Fund $

c. How much will an investment of $100 in each fund grow to after 8 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Loaded-Up Fund $ Economy Fund $

Explanation / Answer

A) After 1 year, loaded fund =100(1.08-0.01-0.009) = $106.1 ; Economy fund = $100(1.08-0.02-0.001) = $105.9

B)After 5 years,Loaded fund = $100*(1.061)5 = $100*1.35 = $135 ;Economy fund = $100*(1.059)5 = 100*1.33 =$133

C)After 8 years,Loaded fund = $100*(1.061)8= $100*1.61=$161;Economy fund = $100*(1.059)8 =100*1.58 = $1.58

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

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