Actively Managed Mutual Funds Charge Higher Management Fees Than Passive

question 8

Multiple Choice

Actively managed mutual funds charge higher management fees than passive funds.Assume that the net return to an active fund (after fees) is 9.5% (0.79% per month) and the net return to a passive fund is 10.5% (0.875% per month) .Consider an investor who invests $600 per month (end-of-month) over thirty years in the passive fund.What is the future value of her savings? Now consider an investor who invests on a monthly basis over thirty years in the active fund.If the active fund investor wants the same future value as the passive fund investor,then how much more must she invest per month?

• A) $145.79
• B) $150.62
• C) $59.86
• D) $152.33
• E) $167.92

---

Definitions:

Balance Sheet

A balance sheet is a financial statement that showcases an organization's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

U.S. Dollars

The official currency of the United States, widely used as a benchmark and standard for international financial transactions.

Translation Adjustment

An accounting entry that arises when converting financial statements of foreign subsidiaries into the parent company's reporting currency, affecting comprehensive income.

Functional Currency

The currency of the primary economic environment in which an entity operates, generally the currency in which it primarily generates and expends cash.