Question
In: Finance
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.
a. If you plan to invest for two years, what
annual rate of return must the fund portfolio earn for you to be
better off in the fund than in the CD? Assume annual compounding of
returns. (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
8.69
b. If you plan to invest for six years, what
annual rate of return must the fund portfolio earn for you to be
better off in the fund than in the CD? Assume annual compounding of
returns. (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
7.22
c. Now suppose that instead of a front-end load
the fund assesses a 12b-1 fee of 0.75% 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? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
?
Solutions
Expert Solution
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jeff jeffy answered 1 year agoRelated Solutions
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