Question

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?

Answer #1

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 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 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 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 $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 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...

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 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?

Loaded-Up Fund charges a 12b-1 fee of 0.75% and maintains an
expense ratio of 0.50%. Economy Fund charges a front-end load of
3.0%, but has no 12b-1 fee and an expense ratio of 0.25%. Assume
the rate of return on both funds’ portfolios (before any fees) is
10% per year.
How much will an investment of $1,000 in each fund grow to
after: (Round your answers to 2 decimal
places.)
ONLY NEED ANSWERS OF ECONOMY FUND PART B AND C...

Loaded-Up Fund charges a 12b-1 fee of 1.00% and maintains an
expense ratio of 0.75%. Economy Fund charges a front-end load of
2.0%, but has no 12b-1 fee and an expense ratio of 0.25%. Assume
the rate of return on both funds’ portfolios (before any fees) is
9% per year.
How much will an investment of $1,000 in each fund grow to
after: (Round your answers to 2 decimal
places.)
year 1 Loaded up fund Economy Fund
year 3
uear10

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