Question

Cheryl has invested $600 in a mutual fund that charges 6% front-end load. She plans to keep her investment in the fund for the next 10 years. What will be her average annual return, if she expects the fund to earn a 5% reported return in an average year? 4.35% 4.7% -1.3% 5%

Answer 1

SOLUTION :

Upload front = 6% = 0.06 in decimals.

So, effective cost of $1  after front-end-upload of $0.06 = 1 + 0.06 = 1.06 ($)

Average return in a year = 5% = $0.05 per dollar of cost.

So, 

Effective return per dollar when effective cost is $1.06

= 0.05 / 1.06

= 0.047

= 4.7 % : 2nd Option : ANSWER.

Answer 2

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

E AutoSum7 B a copy 2 Clear Sort & Filter Editing Find & Select Cells 740 PE EPS, STOCK DIVIDEND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins * Cut Calibri - 11 -A N = = = Wrap Text General Paste BIU. 19. A ESSE Merge & Center $ % 58. Conditional Format Cell Insert Delete Format Formatting as Table Styles Clipboard Font Alignment Number Styles AC199 AB | AC AD AE AF AG AH AI AJ 188 189 A PERSON INVESTED $600 190 VALUE OF INVESTMENT AFTER 10 YEARS FRONT LOAD = 6%, RETURN =5% AK AL AM 3 191 192 VALUE OF INVESTMENT = 918.70 [= 600*(1-6%)*(1+ 5% (0% +0%))^10] 193 194 RETURN FOR 10 YEARS 53.12% [918.70/600 - 1] 195 ANSWER AVERAGE REALIZED ANNUAL RETURN = 4.35% ((1+0.5312)^(1/10) - 1] 196 197 198 199 200 201 202 203 204 205 HE STOCK DIV NAV HEDGE FUND ME EV PE EPS DIV ABNORMAL deberk MARGIN MONEY marginal tax PB ROPI O Re HIGH LOW TARGET PRICE ferences 0 + APV ROSS price quote EVA MVAT ED 140% DER 99 % ENG 29-07-2019