An Investor Is Considering the Purchase of CHECK Fund for His

question 4

Essay

An investor is considering the purchase of CHECK Fund for his portfolio. Like many U.S.-based mutual funds today, CHECK has more than one class of shares. Although all classes hold the same portfolio of securities, each class has a different expense structure. This particular mutual fund
has three classes of shares: A, B, and C. The expenses of these classes are summarized in the following table:
The time horizon associated with the investor's objective in purchasing CHECK is five years. He expects equity investments with risk characteristics similar to CHECK to earn 8% per year, and he decides to make his selection of fund share class based on an assumed 8% return each year, gross of any of the expenses given in the table above.
a. Based on only the above information, determine the class of shares that is most appropriate for this investor. Assume that expense percentages given will be constant at the given values. Assume that the deferred sales charges are computed on the basis of NAV.
b. Suppose that, as a result of an unforeseen liquidity need, the investor needs to liquidate his investment at the end of the first year. Assume an 8% rate of return has been earned. Determine the relative performance of the three fund classes, and interpret the results.

---

Definitions:

Fake News

False or misleading information presented as news, often with the intent of deceiving or manipulating public perception.

Elon Musk

An entrepreneur and business magnate known for founding and leading companies such as SpaceX, Tesla, Inc., and Neuralink, among others.

Financial Standing

The current financial health or status of an individual or organization, often assessed through assets, liabilities, income, and credit history.

Social Media Crises

Situations where negative events or commentary spread rapidly through social media, impacting an organization's reputation.