Calculate the after-withdrawal future value of $10,000 invested for five years in each share class in the table below. In terms of costs, which would be the best investment for someone who knows the fund will be sold at the end of the five-year period? Assume that each fund's gross (before fees) total return is 12.00 percent per year.
|
Cost |
Class "A" |
Class "B" |
Class "C" |
|
Front-end load |
5.755.75 |
0.00 |
0.00 |
|
Back-end load |
0.00 |
5.005.00 |
1.001.00 |
|
Declining 1% per year |
First year only |
||
|
Management fee |
0.550.55 |
0.900.90 |
1.001.00 |
|
12b-1 fee |
0.250.25 |
0.500.50 |
1.00 |
| Cost | class A | class B | class B |
| Investment amount | $10000 | $10000 | $10000 |
| Fromt end load (%) | 5.75% | 0.00% | 0.00% |
| Fromt end load (amount) | $575 | $0 | $0 |
| Net investment amount | $9425 | $10000 | $10000 |
| Investment period ( years) | 5 | 5 | 5 |
| Back end load | 0.00% | 5.00% | 1.00% |
| Declining 1% per year | first year only | ||
| Back end load (invested for 5 years) | 0 | 0 | 0 |
| Management fees (%) | 0.55 | 0.90 | 1.00 |
| 12-b 1 fees (%) | 0.25 | 0.50 | 1.00 |
| Total fees | 0.8 | 1.4 | 2.00 |
| Gross return (%) | 12 | 12 | 12 |
| Net return (%) | 11.2 | 10.6 | 10 |
| Gross value of investment | $16610.07 (9425 × (1+0.12)5 | $17623.42 | $17623.42 |
| Net value of investment | $16025.27 (9425 × (1+0.112)5 | $16549.15 | $16105.10 |
| Best option |
Answer = 16549.15
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