You have $12,500 to invest and you are considering investing in Fund X. The fund charges a front-end load of 3% and an annual expense fee of 2.25% of the ending asset value over the year. You believe the fund's gross rate of return will be 8% per year. If you make the investment, what should your investment be worth in one year?

Question

Quizplus · Accepted Answer

The investment amount after the front-end load is $12,125. The expected gross rate of return is 8%, so the investment should be worth $13,095.00 after one year. However, there is also an annual expense fee of 2.25%, which reduces the ending asset value to $12,800.36. Therefore, the best choice is D.

You Have $12,500 to Invest and You Are Considering Investing