Question

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

Answer 1

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.