Question

You pay $21,600 to the Laramie Fund at the beginning of the year. The fund deducted a front-end load of 2%. The securities in the fund increased in value by 9% annually. The fund's expense ratio is 1.2% and is deducted from year-end asset values. The back-end load fees start at 5% and fall by 1% for each full year the investor holds the fund (until the fifth year).  What is the value of the fund if you sell your fund at the end of year 3?

Answer 1

Initial payment = 21,600

Front end deduct = 2% of initial payment = 432

Grows annually at 9%, with expense ratio deducted 1.2% at a year-end value

YEAR	Beginning Balance	Grows by 9%	Expense ratio deduction by 1.2%	Ending balance
1	21600 - 432 = 21168	21169*1.09 = 23073.12	23073.12*0.012 = 276.877	22796.243
2	22796.243	22796.243*1.09 = 24847.90487	24847.90487*0.012 = 298.175	24549.730
3	24549.730	24549.730*1.09 = 26759.2057	26759.2057*0.012 = 321.110	26438.0957

So the ending balance is 26438.0957 from which a back end load fees will be deducted of 3% = 26438.0957*0.03 = 793.1429

Value of fund after selling = 26438.0957 - 793.14287 = 25644.9528