1. ## Mutual Fund Question

Question:
You have \$10,000 to invest which of the following will be your best investment vehicle?
Mutual Fund A: 5% load, expenses 1.25% per year. ARR = 9%, you expect to hold your investment for 3 years.
Mutual fund B: A no load fund with the following backend load.
Hold for a year or less 4%
Hold for two years or less 3%
Hold for 3 years or less 2%
Hold for less than 5 years 0.5%
The fund is expected to return 11%, and annual expenses are 1.3%, you expect to hold your investment for 2 years.

Mutual Fund A
(0.95)(1.09^2)(0.9875^3) = 1.1847
(1.1847^1/3) - 1 = 5.81%

BUT
Once again, I don't know how to solve for the back-end load. How do I figure out everything for Mutual Fund B?

2. Hey Interesting question freakshow... clarify if you want to hold the investment for 3years or that period can be flexible..
if the prior applies that eliminates your 2 options of holding investment less than 2 years and also which has larger percentage of load
so if you are ready to hold just more than 3 years you applicable load is 0.5%
ARR = 11% and exit load is 1.3%...

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Abby Nelson
merchant services