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The Bruin Stock Fund sells Class A shares that have a front-end load of 5.55 percent, a 12b-1 fee of .27 percent, and other fees of 0.85 percent. There are also Class B shares with a 5 percent CDSC that declines 1 percent per year, a 12b-1 fee of 1.2 percent, and other fees of .85 percent. Assume the portfolio return is 8 percent per year.

1.

What is the value of $1 invested in each share class if your investment horizon is 3 years?
2.

What if your investment horizon is 20 years?

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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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Suppose an individual invests $20,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.0 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 1.0 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 15 percent each year paid on the last day of the year. If the investor reinvests the annual returns paid on the investment, calculate the annual return on the mutual funds over the two-year investment period.

A. The individuals actual investment, after the load fee is deducted:

B. Annual operating expenses:

C. Value of investment at end of year 1:

D. The investors return on the mutual fund investment after 1 year:

E. Value of investment at end of year 2:

F. Thus the investors annual return on the mutual fund over a 2 year period:

Suppose an individual invests $20,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.0 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 1.0 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 15 percent each year paid on the last day of the year. If the investor reinvests the annual returns paid on the investment, calculate the annual return on the mutual funds over the two-year investment period.

A. The individuals actual investment, after the load fee is deducted:

B. Annual operating expenses:

C. Value of investment at end of year 1:

D. The investors return on the mutual fund investment after 1 year:

E. Value of investment at end of year 2:

F. Thus the investors annual return on the mutual fund over a 2 year period:

A mutual fund’s net asset value is $50, but the fund charges an exit fee of 1 percent of net asset value and a 4 percent load fee (front-loaded). An individual client purchases the shares of the mutual fund. During the year, the fund distributes $2.34. The net asset value rises to $58.38 and the investor redeems the shares.

a) What is the percentage return the fund can report that was achieved by its portfolio managers?

b) What is the percentage return the individual earned on the investment?

Why is this answer different from the answer in part (a)?

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