On January 1, 2017, you invest $20,000 in Libby Mutual Fund, a load fund that charges a fee of 2.5 percent. The fund's returns were 9 percent in 2017, 8 percent in 2018, and 3 percent in 2019. If you redeem all your shares on December 31, 2019, what is the dollar value?

Question

Quizplus · Accepted Answer

To calculate the value of our mutual fund at the end of 2019, we need to first adjust for the sales charge of 2.5% that was imposed at the beginning of 2017. This means that we only invested 97.5% of our $20,000, or $19,500.

To calculate our ending balance, we need to apply the fund's returns in each year:

End of 2017 balance = $19,500 x 1.09 = $21,255
End of 2018 balance = $21,255 x 1.08 = $22,943.40
End of 2019 balance = $22,943.40 x 1.03 = $23,644.06

Therefore, the dollar value of our investment at the end of 2019 is $23,644.06.

The best choice is C.

On January 1, 2017, You Invest $20,000 in Libby Mutual