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You are considering an investment in a mutual fund with a 4% front-end load and an expense ratio of 0.9%. You can invest instead in a bank CD paying 6% interest.
a. 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? Assume annual compounding of returns. (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.)
b. 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.)
c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 1.15% 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.)
Niko has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of five years. The depreciation schedule for the machine is straight-line with no salvage value. What is the financial break-even point?
Financial ratios help us identify some of the financial strengths and weaknesses of a company. Identify four ratios we can use and explain why they are important. Provide an example of each ratio used.
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Suppose that you borrow $1,000 and the loan is to be repaid in three equal, end of year payments (an ordinary annuity). The interest rate on the loan is 6%. How of the second payment goes to paying interest?
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