5-85 An investor purchases fund shares with a 3 percent front-end load and expects to hold the shares for 10 years.The fund has a total fund expense ratio (including 12b-1 fees)of 1 percent per year.The annual total shareholder cost for this fund is _______ per year.

Question

Quizplus · Accepted Answer

The total shareholder cost is the combination of the front-end load and the annual expense ratio.

Front-end load = 3%
Annual expense ratio = 1%

After 10 years, the total cost would be:
Front-end load = 3%
Annual expense ratio = 1% x 10 = 10%

Total shareholder cost = front-end load + annual expense ratio = 3% + 10% = 13%

Therefore, the annual total shareholder cost for this fund is 1.3% per year (13% divided by 10 years).

So, the correct choice is D.

5-85 an Investor Purchases Fund Shares with a 3 Percent