EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 4, Problem 19PS
Summary Introduction
(A)
Adequate information:
12b-1 fees on Loaded-up fund- 1%
Expense ratio on Loaded-up fund- .75%
Front end load on Economy fund- 2%
Expense ratio on Economy fund- .25%
Return on portfolio of each fund- 6%
To compute:growth in investment of each fund after 1 year
Introduction:
Growth in investment made in mutual fund is represented by the rate of
Summary Introduction
(B)
Adequate information:
Growth in loaded up fund- 4.25% per annum
To compute:growth in investment of each fund after 3 year
Introduction:
Growth in investment made in mutual fund is represented by the rate of return on portfolio assets after charging expense ratio.
Summary Introduction
(C)
Adequate information:
Growth in loaded up fund- 4.25% per annum
Growth in economy fund- 5.64% per annum
To compute:growth in investment of each fund after 10 year
Introduction:
Growth in investment made in mutual fund is represented by the rate of return on portfolio assets after charging expense ratio.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
QuantAlpha fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.75%. Assume the rate of return on fund portfolio (before any taxes) is 6% per year. How much will an investment of $1000 in the fund grow to after 10 years?
GROW fund Charges a front end load of 3%, but has no 12B-1 fee an expense ratio of .5%. Assume the rate of return on fund portfolio (before any fees) is 7% per year. how much will an investment of $1000 in the fund grow to after 11 years?
Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.90%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and has an expense ratio of 0.10%. Assume the rate of return on both funds’ portfolios (before any fees) is 5% per year.
Required:
a. How much will an investment of $100 in each fund grow to after 1 year? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. How much will an investment of $100 in each fund grow to after 2 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
c. How much will an investment of $100 in each fund grow to after 9 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- What is the equivalent average annual effective rate of interest over 5-year period if the fund earns d^{(4)} = 4% for the initial 1 year, d^{(12)} = 6% for the next 2 years, and i^{(6)} = 9% in the last 2 years?arrow_forwardThe value in pounds of a fund at time t = 0 is V0 = 50, 000. After one year (at t = 1) it has increased to V1 = 51, 500 and at that time £1, 500 is withdrawn. After two years (at t = 2) the fund is worth V2 = 50, 800. (a) Compute the time-weighted rate of return. (b) If the fund is liquidated after two years what is the yield that has been achieved?arrow_forward3. The value in pounds of a fund at time t = 0 is Vo = 50, 000. After one year (at t = 1) it has increased to V₁ = 51, 500 and at that time £1,500 is withdrawn. After two years (at t = 2) the fund is worth V₂ = 50, 800. Compute the time-weighted rate of return.arrow_forward
- A back load fund has initial load of 5% and it will decline by 1% each year after the initial purchase. If you take your money out at the end of year 3, what is the cost of the load if you invested $10,000 in the fund with initial NAV of $23 and adjusted NAV of $36.8 at the end of year 3?arrow_forwardA pension fund starts the year with $50million. After 6 months it has appreciated to $60million at which point it pays out pension of $20million. In the second half of the year, the fund appreciates by a further 50% Required; 1. Calculate the annually compounded $ Time weighted rate of return 2. Calculate the annually $ weighted rate of return 3. Suppose that this fund has a midyear cash inflow of $ 20 million rather than an outflow. Would this reduce or increase the time weighted rate of returnarrow_forwardYou have $5,000 to invest You are comparing two investment funds. Fund A returns 4%/yr compounded monthly Fund B returns 4.05% compounded quarterly. Which should you choose and why?arrow_forward
- Computing Future and Present Value Under Different Investment Assumptions When answering the following question, round your answer to the nearest whole number. Do not use a negative sign with your answer. 4. If we make a payment of $1,725 each month starting today into a fund that earns 6%, how many months does it take to accumulate $100,000? Assume monthly compounding of interest.arrow_forwardYou have HK$10,000,000 for a particular investment fund. Suppose the fund pays you interest monthly at interest rate of 24% p.a. The term of the fund is similar to time deposit compounded monthly. What is the Annual Equivalent Rate? For how long this investment doubles?arrow_forwardPleasearrow_forward
- Suppose that we make contributions to a fund of $125 today and $750 in twoyears for a return of $1000 in one year. First write the Net Present Value as a function of the discount factor ν. Secondly, use the NPV to calculate the yield rate of this investment (select the larger value for i. Finally, explain whether or not this is a good investment for us. Please show all workarrow_forward$1,000 is invested in a fund at the beginning of the year. The fund rate of return is 8% for the first half of the year, and 10% for the second half. You are given the following methods of determining return, given the indicated transactions: Scenario Return Measure Midyear Transaction I Dollar-weighted $500 deposit II Dollar-weighted $500 withdrawal III Time-weighted $500 deposit IV Time-weighted $500 withdrawal Rank the rates of returns under these scenarios. A. I < II = IV < III B. II < III = IV < I C. III < I = II < IV D. IV < I = II < III E. None of these answers is correct.arrow_forwardAn investor puts $2,000 into a deposit account with a fixed rate of return of 10% per year. A second sum of $1,000 is invested in a fund with an expected rate of return of 16% and a standard deviation of 8% per year. a. Find the expected value of the total amount of money this investor will have after a year. b. Find the standard deviation of the total amount after a year.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License