Rita Is Choosing Between Two Mutual Funds

question 50

Multiple Choice

Rita is choosing between two mutual funds. While both funds have the same risk level, Fund A has historical returns of 9.3% and Fund B has historical returns of 8.5%. Fund A also has an expense ratio of 1.1% while Fund B has an expense ratio of 0.4%. Based on this information, which fund should Rita choose and why?

• A) Fund A because its historical return is higher: 9.3% vs. 8.5%.
• B) Fund A because its after-fee return is higher: 10.4% vs. 8.9%.
• C) Fund A because its after-fee return is higher 8.2% vs. 8.1%.
• D) Fund A because its expense ratio is higher 1.1% vs. 0.4%.

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Definitions:

Originator

An individual or entity that creates or initiates something, such as an idea, project, or product.

Interchange

The act of (or a place designed for) exchanging things, ideas, or communications between people or groups.

Organizational Compatibility

The degree to which an individual's values, goals, and behaviors align with the culture, values, and objectives of an organization.

Homophily

The tendency for individuals to associate and bond with similar others, often summarized as "like attracts like."