Rita is choosing between two mutual funds. While both funds have the same risk level, Fund A has historical returns of 9.3% and Fund B has historical returns of 8.5%. Fund A also has an expense ratio of 1.1% while Fund B has an expense ratio of 0.4%. Based on this information, which fund should Rita choose and why?

Question

Quizplus · Accepted Answer

Fund A's after-fee return is calculated by subtracting the expense ratio from the historical return, which gives 9.3% - 1.1% = 8.2%. Fund B's after-fee return is 8.5% - 0.4% = 8.1%. Therefore, Fund A has a slightly higher after-fee return, making it the better choice based on the given information.

Rita Is Choosing Between Two Mutual Funds