Question

In 2012 you invested $8,000 in a fund. The fund had the following return and expenses:

Year	Before-Fee Return	Annual Expense Ratio	Annual 12b-1 Fee
2012	12%	3.8%	0.25%
2013	4%	3.8%	0.25%

Calculate the amount you can cash out at the end of 2013 and the amount paid in fees altogether. The fund has a 4% deferred sales charge.

Group of answer choices

$8,631.68; $1,031.99

$8,286.72; $686.72

$8,631.68; $686.72

$8,286.42; $1,031.99

none of the above

Answer 1

Amount cashed out = amount invested * (1 + (year 1 before fee return - year 1 expense ratio - year 1 12b1 fee)) * (1 + (year 2 before fee return - year 2 expense ratio - year 2 12b1 fee)) * (1 - deferred sales charge)

Amount cashed out = $8,000 * (1 + (12% - 3.8% - 0.25%)) * (1 + (4% - 3.8% - 0.25%)) * (1 - 4%)

Amount cashed out = $8,286.42

total amount paid in fees = (amount invested * (1 + year 1 before fee return) * (1 + year 2 before fee return)) - amount cashed out

total amount paid in fees = ($8,000 * (1 + 12%) * (1 + 4%)) - $8,286.42

total amount paid in fees = $1,031.99