Answer:
a. The amount in Loaded-UP Fund will grow to $104.25 after 1 year, while the amount in the Economy Fund will grow to $103.64 after 1 year.
b. The amount in Loaded-UP Fund will grow to $113.30 after 3 years, while the amount in the Economy Fund will grow to $115.90 after 3 years.
c. The amount in Loaded-UP Fund will grow to $151.62 after 10 years, while the amount in the Economy Fund will grow to $171.41 after 10 years.
Explanation:
The following are the relevant formulae to use:
Amount available in Loaded-UP Fund after a certain year = Investment * (1 + Rate of return – 12b-1 fee – Expense ratio)^Number of years ……………….. (1)
Amount available in Economy Fund after a certain year = Investment * (1 – Front-end load) * (1 + Rate of return – Expense ratio)^Number of years ……………….. (2)
Assuming investment is equal to $100 and using equations (1) and (2), we have:
a. 1 year?
Amount available in Loaded-UP Fund after 3 years = $100 * (1 + 6% - 1% - 0.75%)^1 = $104.25
Amount available in Economy Fund after 3 years = $100 * (1 - 2%) * (1 + 6% - 0.25%)^1 = $103.64
Therefore, the amount in Loaded-UP Fund will grow to $104.25 after 1 year, while the amount in the Economy Fund will grow to $103.64 after 1 year.
b. 3 years?
Amount available in Loaded-UP Fund after 3 years = $100 * (1 + 6% - 1% - 0.75%)^3 = $113.30
Amount available in Economy Fund after 3 years = $100 * (1 - 2%) * (1 + 6% - 0.25%)^3 = $115.90
Therefore, the amount in Loaded-UP Fund will grow to $113.30 after 3 years, while the amount in the Economy Fund will grow to $115.90 after 3 years.
c. 10 years?
Amount available in Loaded-UP Fund after 3 years = $100 * (1 + 6% - 1% - 0.75%)^10 = $151.62
Amount available in Economy Fund after 3 years = $100 * (1 - 2%) * (1 + 6% - 0.25%)^10 = $171.41
Therefore, the amount in Loaded-UP Fund will grow to $151.62 after 10 years, while the amount in the Economy Fund will grow to $171.41 after 10 years.
