Question

# 1. You plan to invest \$20,000 into a mutual fund with 1.5% front-end load, 1.5% back-end...

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

1. The amount to be invested into the fund after taking necessary fees into account is:

Total amt to invest = \$20,000

Front end load = \$20,000 * 1.5% = \$300

Hence, Total amt - front end load = \$20,000 - \$300 = \$19,700 (Inital investment)

Note- The back and load will be taken into consideration at the time of sale. The management fees and 12b-1 fees are charged on annual basis hence not included.

2. The management fees to be paid this year is calculated as:

Total amt to invest = \$20,000

(-) Front end load = \$20,000 * 1.5% = \$300

Total amt - front end load = \$20,000 - \$300 = \$19,700 (Inital investment)

Management fees= \$19,700 * 0.75% = \$147.8

Hence, management fees to be paid is \$147.8.

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