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.

Answer:

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?