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In: Finance
You are considering an investment in a mutual fund with a 4% front-end load. The fund...
You are considering an investment in a mutual fund with a 4% front-end load. The fund charges a back-end load of 5, 4, 3, 2, and 1 percent if the shares are redeemed within the first 5 years, respectively. The expense ratio of 0.5%. Alternatively, you can invest instead in a bank saving account paying 6% interest per year.
1. If you plan to invest for 3 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the bank saving account? Assume annual compounding of returns.
2. How does your answer change if you plan to invest for six years? Why does your answer change?
3. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.75% per year. The back-end load will be 5, 4, 3, 2, and 1 percent if the shares are redeemed within the first 5 years, respectively. Then what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the bank saving account if you plan to invest in 10 years?
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jeff jeffy answered 1 year agoRelated Solutions
You are considering an investment in a mutual fund with a 4% front-end load. The fund...
You are considering an investment in a mutual fund with a 4%
front-end load. The fund charges a back-end load of 5, 4, 3, 2, and
1 percent if the shares are redeemed within the first 5 years,
respectively. The expense ratio of 0.5%. Alternatively, you can
invest instead in a bank saving account paying 6% interest per
year.
a. If you plan to invest for 3 years,
what annual rate of return must the fund portfolio earn for you...
You are considering an investment in a mutual fund with a 4% front-end load. The fund...
You are considering an investment in a mutual fund with a 4%
front-end load. The fund charges a back-end load of 5, 4, 3, 2, and
1 percent if the shares are redeemed within the first 5 years,
respectively. The expense ratio of 0.5%. Alternatively, you can
invest instead in a bank saving account paying 6% interest per
year.
a. If you plan to invest for 3 years, what annual rate of return
must the fund portfolio earn for you...
You are considering an investment in a mutual fund with a 5% front-end load and an...
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a.
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You are considering an investment in a mutual fund with a 5% front-end load fee and...
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front-end load fee and expense ratio of 0.25%. You can invest
instead in a bank CD paying 2% interest.
(a) If you plan to invest for 3 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.
(b) How does your answer change if you plan to invest for...
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...
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load and an expense ratio of 0.6%. You can invest instead in a bank
CD paying 5% 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.)
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You are considering an investment in a mutual fund with a 5% load and an expense...
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b. If you plan to invest for two years...
You are considering an investment in a mutual fund with a 5% load and an expense...
You are considering an investment in a mutual fund with a 5%
load and an expense ratio of 1.25%. You can invest instead in a
bank CD paying 7% 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.)
b....
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