Question

Loaded-Up Fund charges a 12b-1 fee of 1.00% and maintains an expense ratio of 0.75%. Economy Fund charges a front-end load of 2.0%, but has no 12b-1 fee and an expense ratio of 0.25%. Assume the rate of return on both funds’ portfolios (before any fees) is 9% per year.

How much will an investment of $1,000 in each fund grow to after: (Round your answers to 2 decimal places.)

year 1 Loaded up fund Economy Fund

year 3

uear10

Answer 1

Formula = Investment * (1- Front Load) * (1+Return - (12-1 fee + Expenses))^n

1 year

Loaded up Fund = 1000 * (1- 0) * (1+0.09- (0.01 + 0.0075))^1 = 1072.5

Economy Fund = 1000 * (1- 0.02) * (1+0.09- ( 0.0025))^1 = 1065.75

3 year

Loaded up Fund = 1000 * (1- 0) * (1+0.09- (0.01 + 0.0075))^3 = 1233.45

Economy Fund = 1000 * (1- 0.02) * (1+0.09- ( 0.0025))^3 = 1260.42

10 year

Loaded up Fund = 1000 * (1- 0) * (1+0.09- (0.01 + 0.0075))^10 = 2013.60

Economy Fund = 1000 * (1- 0.02) * (1+0.09- ( 0.0025))^10 = 2267.35