a. If you invest for 4 years, your CD will give =(1+0.02)^4
If you invest in the mutual fund, you have a 7% loan and a 0.75% expense ratio
(1-0.07)*(1-0.0075)^4 *(1+r)^4 = (1.02)^4
(1+r)^4 = 1.19948
r = 0.0465. 4.65%
Mutual fund should earn 4.66%
b. If you invest for 8 years
(1-0.07)*(1-0.0075)^8*(1+r)^8 = 1.02^8
(1+r)^ 8= 1.3381
r = 0.0371 = 3.71%
Mutual fund should earn 3.71%
c. We cannot answer (c) since we do not know if the investment horizon is 4 years or 8 years. The question is incomplete
in a mutual fund with a 7% load and expense ratio of 075%. You can Invest...
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