CFA Practice Question
Mutual funds X has the following fees: 8% front end load; 0.75% annual expenses; and 2% back-end fees.
If an investor purchases fund X and holds it for 3 years, the percentage she will receive of what she would if fees were zero is:
A. 82.15%
B. 88.15%
C. 78.15%
Explanation: If fees were zero suppose the amount received was P. Then with fees the amount received will be P * (1 - 0.08) * (1 - 0.0075)^3 * (1 - 0.02) = P * 88.15%
User Contributed Comments 4
| User | Comment |
|---|---|
| Clude | Assume no fee, you invest $100 now and annual return is 100%. At the end of yr 3=$800. With fees: 100*(1-8%)*(1-0.75%)^3*(1+100%)^3*(1-2%)=705.17 |
| jjhigdon | Start with $1, take out 8% sales load = 92%, minus .75% annual expenses: 92% * (1-.0075)^3 = 89.95%, less the 2% back end fee = 88.15% |
| praj24 | Thanks JJ |
| birdperson | great answers, thanks |