Suppose You Consider Investing $1,000 in a Load Fund Which

question 9

Multiple Choice

Suppose you consider investing $1,000 in a load fund which charges a fee of 2%, and you expect the fund to earn 14% over the next year. Alternatively, you could invest in a no-load fund with similar risk that is expected to earn 9% and charges a 1/2% redemption fee. Which is better and by how much?

• A) Funds are equal
• B) Load fund by $32.65
• C) Load fund by $50.55
• D) No-load fund by $64.55
• E) No-load fund by $44.30

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Definitions:

Scottish Professor

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An economic system in which the government owns most of the productive resources except labor; it usually involves the redistribution of income.