Reference no: EM13256399
Consider the following four investments
a) You invest $3,000 annually in a mutual fund that earns 10% annually, and you reinvest all the distributions. How much will you have in the account at the end of 20 years?
b) You invest $3,000 annually in a mutual fund with a 5% load fee so that only $2,850 is actually invested in the fund. The fund ears 10% annually, and you reinvest all the distributions. How much will you have in the account at the end of 20 years? (Assume that all distributions are not subject to the load fee.)
c) You invest $3,000 annually in no-load mutual fund that charges b-1 fee of 1%. The fund earns 10% annually before fees, and you reinvest all distributions. How much will you have in the account at the end of 20 years?
d) You invest $3,000 annually in no-load mutual fund that has a 5% exit fee. The fund earns 10% annually before fees, and you reinvest all distributions. How much will you have in the account at the end of 20 years?
In each case you invest the same amount ($3,000) every year; the fund earns the same amount each year (10%), and you make each investment for the same time period (20 years). At the end of the 20 years, with withdraw the funds. Why is the final amount in each mutual fund different?
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