You are considering investing $50,000 in two mutual funds. The first fund is a load fund with a fee of 6% and you expect the fund to earn 11% over the next year. Alternatively, you could invest in a no load fund that is expected to earn 8% and has a 0.5% redemption fee. What fund has a higher return and how much more value will it have after the first year?

Question

Quizplus · Accepted Answer

Load Fund: $50,000 (1.00 - 0.06) (1.11) = $52,170
No-Load Fund: $50,000 (1.08) (1.00 - .005) = $53,730
No-Load Fund is preferred. The value difference is $53,730 - $52,170 = $1,560

You Are Considering Investing $50,000 in Two Mutual Funds