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Anna11 [10]
3 years ago
6

You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You

could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD
Business
2 answers:
Vikentia [17]3 years ago
6 0

Answer:

7.85%

Explanation:

Therefore;

CD paying per year + annual expense ratio + annual 12b-1 fee

6.5 + .06 +.075 = 7.85%

The minimum annual rate of return must the fund earn to make you better off in the fund than in the CD is 7. 85%

aev [14]3 years ago
3 0

Answer:

7.85%

Explanation:

12b-1 fees and management fees (annual expense ratio) represent the annual expenses that the mutual fund managers deduct from your gross returns.  

net return = gross return - annual expense ratio - 12b-1

if you want a net return ≥ 6.5% (given by a CD), then:

6.5% = gross return - 0.6% - 0.75%

gross return = 6.5% + 0.6% + 0.75% = 7.85%

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Description                                                              A               B               C

Selling price after further processing                    20              13              32

Selling price at the split off point                            16               8        25

Incremental revenue per pound or gallon             4               5         7

Total quarterly output in pounds or gallons     $15,000    $20,000    $4,000

Total incremental revenue                              $60,000   $100,000  $28,000

Total incremental processing costs              $63,000   $80,000  $36,000

Total incremental profit or (loss)                       ($3,000) $20,000  ($8,000)

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