Actively managed mutual funds charge higher management fees than passive funds.Assume that the net return to an active fund (after fees)is 9.5% (0.79% per month)and the net return to a passive fund is 10.5% (0.875% per month).Assume that an investor saves $600 per month (end-of-month)over thirty years.What is the difference in the future value of savings between investing in an active fund and a passive fund?
A) $295,152.00
B) $120,519.40
C) $247,352.36
D) $301,732.21

Question

Quizplus · Accepted Answer

11ea7fdb_fc13_e942_a768_cbd988734c0a_TB2902_11 = PMT × 11ea7fdb_fc13_e943_a768_9d9e30c71642_TB2902_11 FV = 600 × 11ea7fdb_fc13_e944_a768_49bba9a46b16_TB2902_11 = $1,214,689
Using a financial calculator:
N = 360, I/Y = .79, PV = 0, PMT = -600, cpt FV = $1,214,689 11ea7fdb_fc13_e945_a768_6750b3faf427_TB2902_11 = PMT × 11ea7fdb_fc13_e946_a768_bf132089f545_TB2902_11 FV = 600 × 11ea7fdb_fc14_1057_a768_6b1935f545c8_TB2902_11 = $1,509,841
Using a financial calculator:
N = 360, I/Y = .875, PV = 0, PMT = -600, cpt FV = $1,509,841
1,509,841 - 1,214,689 = $295,152

Actively Managed Mutual Funds Charge Higher Management Fees Than Passive