You are considering purchasing a no-load mutual fund with an operating expense of .4% and a 12 b-1 expense of .25%. You are also considering purchasing a CD paying 3.0% per year. Wh minimum annual rate of return must the fund earn to make you better off in the fund versus the CD Group of answer choices 3.65 % 3.0% 2.35% 3.4%
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- Assume the risk-free rate is 4%. You are a financial advisor, and must choose one of the funds below to recommend to each of your clients. Whichever fund you recommend, your clients will then combine it with risk-free borrowing and lending depending on their desired level of risk. Expected Return Volatility Fund A 7% 3% Fund B 10% 4% Fund C 9% 4% Which fund would you recommend without knowing your client's risk preference?You are considering an investment in a mutual fund with a 5% load and an expense ratio of 0.5%. You can invest instead in a bank CD paying 3% interest. Required: a. If you plan to invest for 4 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. b. What annual rate of return must the fund portfolio earn if you plan to invest for 6 years to be better off in the fund than in the CD? c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.75% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. a. Annual rate of return b. Annual rate of return c. Annual rate of return % % %You are considering an investment in a mutual fund with a 5% load and an expense ratio of 0.75%. You can invest instead in a bank CD paying 3% interest. Required: a. If you plan to invest for 3 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. b. What annual rate of return must the fund portfolio earn if you plan to invest for 6 years to be better off in the fund than in the CD? c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.50% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
- Suppose you consider investing $1,000 in a load fund which charges a fee of 2%, and you expect the fund to earn 14% over the next year. Alternatively, you could invest in a no-load fund with similar risk that is expected to earn 9% and charges a 1/2 percent redemption fee. Which is better and by how much? a. Funds are equal b. Load fund by $32.65 c. Load fund by $50.55 d. No-load fund by $64.55 e. No-load fund by $44.3040) You are considering investing in a no-load mutual fund with an annual expense ratio of 0.60% and an annual 12b-1 fee of 0.75%. You could also invest in a bank CD paying 6.50% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD? A) 7.10% B) 7.45% C) 7.25% D) 7.85%You are considering an investment in a mutual fund with a 4.5% load and an expense ratio of 0.5%. You can invest instead in a bank CD paying 3.5% interest. If you plan to invest for 5 years, what annual rate of return (i.e. gross ret) must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding.
- Suppose that a mutual fund agent approaches you and promote a fund which allows you to withdraw money from your Employment Provident Fund (EPF) to invest. From the analysis of the agent, the fund expected to pay up to 11% return, and you know that EPF paid an average 6% return and treasury’s return fixed at 2.75%. Based on the discussion in this chapter and in your opinion, are you going to take the investment? Justify your answerSuppose you have recently accepted a new job and are setting up your retirement allocations within the firm's 401k plan. The plan options contain two risky mutual funds, A and B. You may assume that all fees are the same across the two funds. Fund A has an expected return of 6% and the standard deviation of returns is 12%. Fund B has an expected return of 7% and the standard deviation of returns is 15%. The correlation between returns on the two funds is 0. The plan also contains a Treasury fund which provides a risk-free return of 3%. A Suppose you can only invest in one of the two risky mutual funds (A or B), but can combine it with the Treasury fund in any proportions you wish. Which of the two mutual funds would you choose and why B Maintaining the restrictions on your investment choices from the last question, what is the best expected return you could achieve if you set up a portfolio with a standard deviation of returns equal to 10%? (Please express your answer in percentage…You are considering an investment in a mutual fund with a 7% load and expense ratio of 0.5%. You can invest instead in a bank CD paying 3% interest. a. If you plan to invest for 5 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns
- You are considering an investment in a mutual fund with a 3% front-end load and an expense ratio of 0.6%. You can invest instead in a bank CD paying 5% interest. a. If you plan to invest for two years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.) Annual rate of return b. If you plan to invest for six years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.) Annual rate of return 7.13 % Annual rate of return % c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.85% per year. If you plan to invest for two years, what annual rate of return must the fund…You are considering an investment in a mutual fund with a 4% load and an expense ratio of .5%. You can invest instead in a bank CD paying 6% interest.a. If you plan to invest for 2 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns.b. How does your answer change if you plan to invest for 6 years? Why does your answer change?c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of .75% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Does your answer in this case depend on your time horizon?You must choose between a no-load, open-end mutual fund with an annual expense ratio of 0.85 percent but no transaction cost or an ETF with an annual expense ratio of 0.25 percent and a transaction cost of $20.00. a. Calculate which is the lower cost alternative to purchase. b. Calculate which is the lower cost to own over 6 months, if you sell after 7 percent gain. c. Calculate which is the lower cost to own over 2 years, if you achieve a 10 percent per year gain. d. Calculate which is the lower cost to own over 2 years, if you experience a 10 percent per year loss.