Question

A fund sells Class A shares with a front-load of 5% and Class B shares with 12b-1 fees of 0.5% as well as back-end load fees that start at 6% and fall by 1% for each holding year. Assume that the fund return net of operating costs is 10% annually. What will be the value of a $10,000 investment in Class A and B if the shares are sold after (a) 1 year, (b) 4 years, or (c) 10 years? Assume that the fund earns 12% annual returns. [ Round to the nearest dollar: $10,343.62>>$10,344]

Answer 1

Net investment in class A shares after 4% commission is 9600. If the funds earns a 10% return the investment will grow after n years to 9500×(1.1.)n up.

the class B share have no upfront load .However the next return to the investor after 12 b1 fees will only be 9.5%.

1 year

Class A share= $ 10560

Class B shares= $ 10000*(1.095)*(1-.04)= $ 10512

4 year.

Class A = $14055. 36

Class B= 10,000*(1.095) 4Up*(1-.01)=$ 14232.89

10 year

Class A= $24899.93

Class B= 10,000 x (1.095)10up= ¥ 24772.28