Suppose You Consider Investing $5,000 in a Load Fund from Which

question 104

Multiple Choice

Suppose you consider investing $5,000 in a load fund from which a fee of 8 percent is deducted and you expect the fund to earn 12 percent over the next year. Alternatively, you could invest in a no-load fund that is expected to earn 10 percent and which takes a 1/2 percent redemption fee. Which is better and by how much?

• A) load fund by $320.50
• B) load fund by $575.50
• C) funds are equal
• D) no load fund by $320.50
• E) no load fund by $575.50

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Definitions:

Expected Dividend

The forecasted payment of profits by a corporation to its shareholders, usually announced by the company's board of directors.

Dividend Growth Rate

The rate of growth in a company's dividend payments, expressed as an annual percentage.

Expected Return

The anticipated profit or loss from an investment over a certain period of time, often expressed as a percentage.

Paid Dividends

Cash or other assets distributed to shareholders out of a corporation's earnings.