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 perc

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?

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Isabelle 1 month 2021-10-22T05:20:55+00:00 2 Answers 0 views 0

Answers ( )

    0
    2021-10-22T05:22:15+00:00

    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
    0
    2021-10-22T05:22:28+00:00

    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.

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