Question

Alizeh invests $10,000 in an actively managed mutual fund that has an annual expense ratio of 1.3%. The investment earns a 7% rate of return.
How much did she make in one year on her investment with the 7% rate of return?
How much does she pay in fees for her actively managed mutual fund?
At the end of the year, what’s the total value (AFTER FEES) of Alizeh’s mutual fund?

Answer 1

Answer:

Alizeh

The total value (AFTER FEES) of Alizeh’s mutual fund is:

$10,570.

Explanation:

a) Data and Calculations:

Investment in mutual fund = $10,000

Annual expense ratio = 1.3%

Rate of return on investment = 7%

b) Annual return on investment = $700 ($10,000 * 7%)

c) Annual fees for her actively managed mutual fund = $130 ($10,000 * 1.3%)

d) At the end of the year, the total value (after fees) of Alizeh's mutual fund:

Investment in mutual fund = $10,000

Annual return on investment = $700

Annual fees for mutual fund = ($130)

Total value =                         $10,570