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preferred stock , 5. You in veas a front-endd fund is the pers%. After you lig annual Part II (15 points each): 5. You invest $10.000 each in two separate funds. The first fund which has a front-end load of 6% and a back-end load of 2.5%. ratio is 2%. The second fund is the Performance (PER) Fund which h loads, but the annual expense ratio is 5%. After you liquidate your hol identical amounts coming in from both funds. HL's annual retur period has been 14%. A) What annual return must have PER generated if you invested for 1 year HL 10,000 separate funds. The first fund is the Heavy load (HL) Fund ad a back-end load of 25% The fund's annual expense Fund which has no front or back end "both funds. HL's annual return over your investment quidate your holdings, you end up with -5 I RER inu 10,000 PER : 10,000 (1-0.05 ) 9.500 9500-10000 -- 5% first 6.16 2.5% 10,000 20 nex 5% 14% B) What annual return must have PER generated if you invested for 10 years? 10,000 (1-0.05) 5987.39 5987,37-70000 - -40,13% 10,000 T C) In order to keep up with HL's performance, what needed to happen to the return from PER when investment period increased from 1 to 10 and why? HL=10,000 (1-.06%) (07.14-.02)'(1 -0.0250) 27698.6 I PER= 10,000 (1.05) – 7698,22 The PER needed to invest up to 5 year and lomant to keep up with HL's performance Page 2

Answer 1

$10,000 HL Fund PER fund 6. Front end load: expense rate : 5% Back end load! 2.5% Expense ratio : 2% HL's retum : 14% liquidation both amounts are same 10000 x 6% = 600 10000 - 600 = 400 Amount invested: Expense ratio: 94000 2% = 188. Amount : 9400 wood 188 va da eve9212 Return: 9214 X 0.14 = 10503.96 Amount recieved after back and load: 10 293.88 at op de ng amounts ea - 9500) 60 9500 peº w Level owo 10293 a: 10293.88 kelion must be 0.0835 = 8.35%.