Question

The Bruin Stock Fund sells Class A shares that have a front-end load of 4.8 percent, a 12b-1 fee of 0.42 percent, and other fees of 1.3 percent. There are also Class B shares with a 5 percent CDSC that declines 1 percent per year, a 12b-1 fee of 1.95 percent, and other fees of 1.3 percent. Assume the portfolio return is 11 percent per year. What is the value of $1 invested in each share class if your investment horizon is 3 years? Class A $ Class B $ What if your investment horizon is 20 years?

Answer 1

Answer:

Step-by-step explanation:

Investment Amount Net of Front end Load (1 - 0.048) = $0.952

The value of $1 invested in each share class if investment horizon is 3 years

• After 3 years: (For every dollar invested)

• Class A: 0.952 x (1+0.11-0.0042-0.013)^3 = $1.24

• Class B: (1 x (1+0.11-0.0195-0.013)^3) x (1-0.02) = $1.23

SIMILARLY,

The value of $1 invested in each share class if investment horizon is 20 years

• After 20 years: (For every dollar invested)

• Class A: 0.952 x (1+0.11-0.0042-0.013)^20 = $5.62

• Class B: 1 x (1+0.11-0.0195-0.013)^20 = $4.45

Answer 2

Answer:

Part 1 :

The total investment for,

Class A =  $1.24

Class B = $ 1.23

Part 2:

The total investment for,

Class A = $ 5.62

Class B = $ 4.45

           

Step-by-step explanation:

The amount of investment Net of Front end Load,

$= 1 - 0.048$

$= 0.952$

Part 1:

If the investment horizon is 3 years, the value of $1 invested in each share class for Class A become,

$= (0.952)(1 + 0.11 - 0.0042 - 0.013)^{3}$

$= 1.24$

The value of $1 invested in each share class for Class A is $1.24.

If the investment horizon is 3 years, the value of $1 invested in each share class for Class B become,

$= ((1)(1 + 0.11 - 0.0195 - 0.013)^{3} )(1-0.02)$

$= 1.23$

The value of $1 invested in each share class for Class B is $1.23.

Part 2:

If the investment horizon is 20 years, the value of $1 invested in each share class for Class A become,

$= (0.952)(1 + 0.11 - 0.0042 - 0.013)^{20}$

$= 5.62$

The value of $1 invested in each share class for Class A is $5.62.

If the investment horizon is 20 years, the value of $1 invested in each share class for Class B become,

$= (1)(1 + 0.11 - 0.0195 - 0.013)^{20}$

$= 4.45$

The value of $1 invested in each share class for Class B is $4.45.