Question

You are considering an investment in a mutual fund with a 4%
load and an expense ratio of 0.5%. You can invest instead in a bank
CD paying 6% interest.

a. If you plan to invest for two years, what annual rate of return
must the fund portfolio earn for you to be better off in the fund
than in the CD? Assume annual compounding of returns.

b. How does your answer change if you plan to invest for six years?
Assume annual compounding of returns.

c. Now suppose that instead of a front-end load the fund assesses a
12b-1 fee of 0.75% per year. If you plan to invest in two years,
what annual rate of return must the fund portfolio earn for you to
be better off in the fund than in the CD? You are considering an
investment in a mutual fund with a 4% load and an expense ratio of
0.5%. You can invest instead in a bank CD paying 6% interest.

a. If you plan to invest for two years, what annual rate of return
must the fund portfolio earn for you to be better off in the fund
than in the CD? Assume annual compounding of returns.

b. How does your answer change if you plan to invest for six years?
Assume annual compounding of returns.

c. Now suppose that instead of a front-end load the fund assesses a
12b-1 fee of 0.75% per year. If you plan to invest in two years,
what annual rate of return must the fund portfolio earn for you to
be better off in the fund than in the CD?

Answer #1

Ans:

Front Load: 4%

Expense ratio: 0.5%

Bank Interest rate: 6%

a.

If investment is done for 2 years, minimum return on portfolio required is:

Frond load/time period + Bank Interest + expense ratio

4%/2+6%+.5%= **8.5%.**

b.

If investment is done for 6 years, minimum return on portfolio required is:

Frond load/time period + Bank Interest + expense ratio

4%/6+6%+.5%= **7.1%.**

c.

If Investment is done for 2 years and there is no front load but a annual fee of .75%, minimum return on portfolio required is:

Annual fee + Bank Interest + expense ratio:

.75%+6%+.5%= **7.25%**

You are considering an investment in a mutual fund with a 4%
load and an expense ratio of 0.5%. You can invest instead in a bank
CD paying 6% interest.
a. If you plan to invest for two years, what
annual rate of return must the fund portfolio earn for you to be
better off in the fund than in the CD? Assume annual compounding of
returns. (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
b....

You are considering an investment in a mutual fund with a 5%
load and an expense ratio of 0.85%. You can invest instead in a
bank CD paying 7% interest. a. If you plan to
invest for two years, what annual rate of return must the fund
portfolio earn for you to be better off in the fund than in the CD?
Assume annual compounding of returns. (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
annual...

You are considering an investment in a mutual fund with a 4%
load and an expense ratio
of 0.5%. You can invest instead in a bank CD paying 6%
interest.
Now suppose that instead of a front-end load the fund assesses a
12b-1 fee of 0.5% per
year. What annual rate of return must the fund portfolio earn for
you to be better off in
the fund than in the CD? Does your answer in this case depend on
your...

You are considering an investment in a mutual fund with a 5%
load and expense ration of 0.5%. You can invest in a bank CD paying
3% interest.
A. If you plan to invest for 4 years, what annual rate of return
must the fund portfolio earn fot you to be better offin the fund
than in the CD? Assume annual compounding of returns.(Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
Annual rate of return__________%
B....

You are considering an investment in a mutual fund with a 4%
front-end load and an expense ratio of 1.1%. You can invest instead
in a bank CD paying 6% interest. If you plan to invest for two
years, what annual rate of return must the fund portfolio earn for
you to be better off in the fund than in the CD? Assume annual
compounding of returns. (Do not round intermediate
calculations. Enter your answer as a decimal rounded to...

You are considering an investment in a mutual fund with a 4%
front-end load and an expense ratio of 1.1%. You can invest instead
in a bank CD paying 6% interest. If you plan to invest for six
years, what annual rate of return must the fund portfolio earn for
you to be better off in the fund than in the CD? Assume annual
compounding of returns (Do not round intermediate
calculations. Enter your answer as a decimal rounded to...

You are considering an investment in a mutual fund with a 4%
load and an expense ratio of 0.5%. You can invest instead in a bank
CD paying 6% interest. ) You are considering an investment in a
mutual fund with a 4% load and an expense ratio of 0.5%. You can
invest instead in a bank CD paying 6% interest. ) You are
considering an investment in a mutual fund with a 4% load and an
expense ratio of...

You have $10,000 to invest and are considering two mutual funds:
No-load Fund and Economy Fund. The No-load Fund charges a 12b-1 fee
of 1% and maintains an expense ratio of 0.50%. The Economy Fund
charges a front-end load of 4%, but has no 12b-1 fee and an expense
ratio of 0.50%. Assume that the rate of return on both funds’
portfolios (before any fees) is 8% per year.
If you plan to buy and hold for three years, which...

1. You plan to invest $20,000 into a mutual fund with 1.5%
front-end load, 1.5% back-end load, 0.75% management fee and 0.23%
12b-1 fees. How much money will be invested into the fund after
taking all necessary fees into account?
• 19,760 • 19,700 • 19,850 • 19,946
2. Continue with your answer from question 1. How much will you
pay in management fees this year if the fee is 0.75%?
• $126.1 • $197.6 • $147.8 • $98.8

You are going to invest in a stock mutual fund with a front-end
load of 5 percent and an expense ratio of 1.57 percent. You also
can invest in a money market mutual fund with a return of 2.6
percent and an expense ratio of 0.30 percent. If you plan to keep
your investment for 2 years, what annual return must the stock
mutual fund earn to exceed an investment in the money market fund?
What if your investment horizon...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 4 minutes ago

asked 5 minutes ago

asked 9 minutes ago

asked 20 minutes ago

asked 39 minutes ago

asked 48 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago