Reference no: EM133326218

Case: Suppose an individual invests $10,000 in a load mutual fund for three years. The load fee entails an up-front commission charge of 6 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 1.25 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 8 percent each year paid on the last day of the year. Assume that the investor reinvests the annual returns paid on the investment.

Question 1: Calculate the net investable funds for year 2 (Hint: First determine the total investable funds for year 1 by taking into account the front-end load fees). Leave four decimal places in the intermediate steps. 

Question 2:  Assume that at the end of year 3, your investment is worth $12,000. Calculate the average annual compound return. Leave four decimal places in the intermediate steps and express the final output in percentages.

Clearly label your findings (e.g., profit margin = .....) and designate which part of the question you are answering (if there are multiple parts). Answers (whether correct or incorrect) without work shown will receive zero points. Simply typing your work will suffice.  (e.g., x = y + 2z).