Concept explainers
(a)
To determine:
The pay in the initial commission.
Introduction:
Mutual fund refers to the fund that is managed by the professionals and consists of the pool of money from various different investors in order to purchase different and various securities.

Explanation of Solution
Initial commission for class A
Given,
Front end load is 5.5,
Worth of the asset is $2,500
Formula to calculate the initial commission,
Substitute 5.5% for front end load and $2,500 for the worth of the asset.
Hence, the initial commission for A is $137.5.
Initial commission for class B
Given,
Front end load is 0.0,
Worth of the asset is $2,500
Formula to calculate the initial commission,
Substitute 0.0% for front end load and $2,500 for the worth of the asset.
Hence, the initial commission for B is $0.
Initial commission for class B
Given,
Front end load is 0.0,
Worth of the asset is $2,500
Formula to calculate the initial commission,
Substitute 0.0% for front end load and $2,500 for the worth of the asset.
Hence, the initial commission for C is $0.
The initial commission for class A, B and C are $137.5, $0 and $0.
(b)
To determine:
The pay in the back end commission.

Explanation of Solution
Back end commission for class A
Given,
Back end load is 0%.
Worth of the asset is $2,500
Formula to calculate the initial commission,
Substitute 0.0% for back end load and $2,500 for the worth of the asset.
Hence, the back end commission for A is $0.
Back end commission for class B
Given,
Back end load is 5%.
Worth of the asset is $2,500
Formula to calculate the initial commission,
Substitute 3.0% for back end load and $2,500 for the worth of the asset.
Hence, the back end commission for B is $75.
Back end commission for class C
Given,
Back end load is 1%.
Worth of the asset is $2,500.
Formula to calculate the initial commission,
Substitute 0.0% for back end load and $2,500 for the worth of the asset.
Hence, the back end commission for C is $0.
Working notes:
Back end load of class B,
Given,
Back end load is 5%.
Declining value for 1 year is 1%.
Declining value for 2 years is 2%.
Computation of the total back end,
Hence, total back end is 3%.
The back end commission for class A, B and C are $0, $75 and $0 respectively.
(c)
To determine:
The annual expenses.

Explanation of Solution
Annual expense for class A
Given,
Management fee is 0.90%
12b-1 fee is 0.25%
Formula to calculate annual expense,
Substitute 5.5% for initial commission, 0.005 for back end load, 0.90% for the management fee and 0.25% for 12b-1 fee.
Hence, the annual expense for class A is $166.25.
Annual expense for class B
Given,
Management fee is 0.90%
12b-1 fee is 0.50%
Formula to calculate annual expense,
Substitute 0.0% for initial commission, 3.0% for back end load, 0.90% for the management fee and 0.50% for 12b-1 fee.
Hence, the annual expense for class B is $110.
Annual expense for class C
Given,
Management fee is 0.90%
12b-1 fee is 1.00%
Formula to calculate annual expense,
Substitute 0.0% for initial commission, 0.0% for back end load, 0.90% for the management fee and 1.0% for 12b-1 fee.
Hence, the annual expense for class C is $47.5.
The annual expense for class A, B, and C are $166.25, $110 and $47.5 respectively.
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Chapter 14 Solutions
PERSONAL FINANCE
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