Annual compounding of returns

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You are considering an investment in a mutual fund with a 5% front-end load and an expense ratio of 1.35%. You can invest instead in a bank CD paying 7% interest.

a.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.) 

b.Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 1.60% per year. 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? (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.)

Reference no: EM132119231

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