You are considering investing in a mutual fund’s A share class
that has a 3% sales charge (front-end load) and annual expense
ratio of 1.0%. Alternatively, you might invest in that fund’s C
shares that have no load and an annual expense ratio of 1.5%.
Assume the fund’s assets return 9% annually.
a. [3 points] For a 2-year holding period, which share class will
you prefer?
b. [3 points] For a 50-year holding period, which share class will you prefer?
c. [5 points] After how many years will the two mutual fund share classes result in the same future wealth amounts?
d. [2 points] How does your answer to part c. change is the fund’s assets return 14% per year? e. [2 points] What accounts for the greater expenses of the C-shares, compared to the Ashares?
a) Value of the share class can be calculated as below
FV = PV x (1 + r)^n
Assume you invest $100 in each of them,
Value in A, FV = 100 x (1 - 3%) x (1 + 9% - 1%)^2 = $113.14
Value in C, FV = 100 x (1 + 9% - 1.5%)^2 = $115.56
b) In A, FV = 100 x (1 - 3%) x (1 + 9% - 1%)^50 = $4,549.46
in C, FV = 100 x (1 + 9% - 1.5%)^50 = $3,718.97
c) In 7 years, value of both funds = $166
d) In 7 years, value of both funds = $228
You are considering investing in a mutual fund’s A share class that has a 3% sales...
You purchased shares of a mutual fund at an offering price of $95 per share at the beginning of the year and paid a front–end load of 4.00%. If the securities in which the fund invested increased in value by 13.25% during the year, and the fund’s expense ratio was 1.50%, what is your rate of return if you sold the fund at the end of the year? Enter your answer rounded to two decimal places. The price of a...
The NAV of a mutual fund is $10 per share. You invest $100,000 in the fund. The front end load is 2%. The investment return of the fund for the year was 10%. You sell your shares. The redemption fees is 3% and the expense ratio is 4%. What is your return from this mutual fund investment?
QUESTION 15 Delta Mutual Funds had year-end assets of $625 million and liabilities of $35 million. There were 25 million shares in the fund at year-end. What was Delta Mutual Funds net asset value? a. $22.90. b. $23.60. c. $24.30. d. $25.00. QUESTION 16 Monica purchased 100 shares of NOLA mutual fund at a price of $25 per share at the beginning of the year and paid a front-end load of 4.5%. The securities in the fund increased in value...
You purchased shares of a mutual fund at an offering price of $95 per share at the beginning of the year and paid a front-end load of 4.25%. If the securities in which the fund invested increased in value by 9.75% during the year, and the fund's expense ratio was 1.90%, what is your rate of return if you sold the fund at the end of the year?
You purchased shares of a mutual fund at a price of $27 per share at the beginning of the year and paid a front-end load of 1.2%. If the securities in which the fund invested increased in value by 12.9% during the year, and the fund's expense ratio was 2.6%, your return if you sold the fund at the end of the year would be ____________%. Select one: a. 12.9 b. -3.8 c. 11.5 d. 10.3 e. 9.0
You purchased 2,800 shares in the New Pacific Growth Fund on January 2, 2019, at an offering price of $55.70 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 3 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 5 percent during 2019, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific...
A mutual fund’s net asset value is $39.30, but the fund charges a 3 percent load fee (front- loaded) and an exit fee of 1 percent (if redeemed in 6 months) of net asset value. An individual client purchases 10 shares of the mutual fund on Jan 5 of year 20X1. During the year 20X1, the fund distributes $3.45 capital gain and $0.75 dividend income. The net asset value rises to $42.12 on Jan 5 of year 20X2 and the...
QUESTION 16 Monica purchased 100 shares of NOLA mutual fund at a price of $25 per share at the beginning of the year and paid a front-end load of 4.5%. The securities in the fund increased in value by 11% during the year and the fund’s expense ratio was 1.2%. What was Monica’s annual return for this year assuming she were to sell at year end? a. 4.50%. b. 4.85%. c. 5.30%. d. 9.80%. QUESTION 26 Most actively managed mutual...
You purchased 4,600 shares in the New Pacific Growth Fund on January 2, 2016, at an offering price of $34.20 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 3 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 7 percent during 2016, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific...
You purchased shares of a mutual fund at a price of $24.6 per share two years ago and paid a front-end load of 4.8% at that point. Assume that the securities in which the fund invested in increased in value by 5.7% during the first year and 4.7% during the second year. Assume further that the fund's expense ratio was 2.4%. Your total return if you sold the fund at the end of the second year would be ______%. Answer...