Question

16. What is a 12b–1 fee? Suppose you have a choice between a load fund with...

16. What is a 12b–1 fee? Suppose you have a choice between a load fund with no
annual 12b–1 fee and a no-load fund with a maximum 12b–1 fee. How would
the length of your expected investment horizon, or holding period, influence
your choice between these two funds?
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

A 12b-1 fee is charged for a mutual fund this fee is for marketing-service commision fee which is capped at 1% under investment act of 1940. Load fund with no annual 12b-1 fee can have service charge fees up to 8.5% however due to competition practicalities this service charge has been coming down in recent times. A no-load fund meaning no need to pay a service charge, however, a 1% of 12b-1 fee has to be paid annually. Therefore a Simple trick is that if the investment horizon targeting is smaller than 12 years usually go for a no-load fund with a 12b-1 fee if greater than 12 years stick to load funds with least service charges if you want to choose from these two.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose an individual invests $26,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $26,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.0 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.61 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 6 percent each...
Suppose an individual invests $32,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $32,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.6 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.67 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 7 percent each...
Suppose an individual invests $21,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $21,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 2.5 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.56 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 8 percent each...
Suppose an individual invests $28,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $28,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.2 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.63 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 8 percent each...
Suppose an individual invests $32,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $32,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.6 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.67 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 7 percent each...
Suppose an individual invests $29,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $29,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.3 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.64 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 9 percent each...
Suppose an individual invests $5,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $5,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 2 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.75 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 8 percent each...
Suppose an individual invests $10,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $10,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.80 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 8 percent each...
You are considering an investment in a mutual fund with a 4% load and an expense...
You are considering an investment in a mutual fund with a 4% load and an expense ratio of 0.5%. You can invest instead in a bank CD paying 6% interest. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.5% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Does your answer in this case depend on your...
economy fund charges a front-end load of 4%, but has no 12b-1 fee. assume the rate...
economy fund charges a front-end load of 4%, but has no 12b-1 fee. assume the rate of return net of operating expenses is 7.5% per year for the fund and initial investment of $10,000.how much is the value of the fund in 12 years?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT