You Are Considering Investing $50,000 in Two Mutual Funds

question 80

Multiple Choice

You are considering investing $50,000 in two mutual funds. The first fund is a load fund with a fee of 6 percent, and you expect the fund to earn 11 percent over the next year. Alternatively, you could invest in a no-load fund that is expected to earn 8 percent and has a 0.5 percent redemption fee. What fund has a higher return and how much more value will it have after the first year?

• A) load fund by $1,360
• B) load fund by $580
• C) no load fund by $580
• D) no load fund by $1,560
• E) no load fund by $1,820

Grasp the concept of loss aversion and related cognitive biases.

Understand the role of legislation in addressing environmental issues.

Recognize sustainable building and urban development practices.

Identify the causes and implications of deforestation.

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Definitions:

Differential Cost

The difference in cost between two alternative decisions, or a change in cost from one period to the next.

Incremental Cost

The additional cost that a company incurs when producing one more unit of a product.

Incremental Costs

Costs that change as a result of a decision to increase or decrease the level of an activity or operation.

Sunk Costs

Costs that have already been incurred and cannot be recovered or altered by future actions, and therefore should not influence current or future business decisions.