Loaded-Up Fund charges a 12b-1 fee of 0.75% and maintains an expense ratio of 0.75%. Economy Fund charges a front-end load of 2.5%, 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 12% per year. How much will an investment of $1,000 in each fund grow to after: 1 year 3 years 10 years
Loaded-Up Fund charges a 12b-1 fee of 0.75% and maintains an expense ratio of 0.75%. Economy Fund charges a front-end load of 2.5%, but has no 12b-1 fee and an expense ratio of 0.25%. Assume the
How much will an investment of $1,000 in each fund grow to after:
1 year
3 years
10 years
Mutual Funds:
Mututal Funds pool small investments from individual investors, aggregate them into one large investible amount, and invest them in securities.
Mutual Funds aim to generate profits from their investments and contribute to the wealth generation of their clients.
Mutual Funds and fees:
Mutual Funds incur expenses in operating and managing the funds. Operating Expenses, 12b-1 fees, and front load fees are some of the expenses.
- Operating Expenses: The operating expenses are charged to mutual fund investors. They are expressed as a percentage and charged annually based on an investor's investment in the fund.
- 12b-1 fees: are fees charged to meet the marketing, distribution, and administration expenses incurred by a fund. In the USA, it is included in the fund's expense ratio. Mutual funds can charge a maximum of 0.25% as administrative expenses and a maximum of 0.75% as marketing and distribution expenses.
- Front Load fees: When fees are charged as soon as investment is made in mututal funds, they are known as front load fees. These fees reduce the quantum of funds available for investment.
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