Walter plans to invest $50,000 in a mutual fund that requires either a 4% front-end load or a 4% back-end load. He expects the fund to return 8% per year and he plans to hold the investment for three years. Calculate the size of the front-end and back-end load and show evidence that Walter is indifferent between the front-end versus back-end load alternatives.

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The Answer of Walter plans to invest $50,000 in a mutual fund that requires either a 4% front-end load or a 4% back-end load. He expects the fund to return 8% per year and he plans to hold the investment for three years. Calculate the size of the front-end and back-end load and show evidence that Walter is indifferent between the front-end versus back-end load alternatives.

Walter Plans to Invest $50,000 in a Mutual Fund That