You Are Considering Investing in a No-Load Mutual Fund with an Annual

question 38

Multiple Choice

You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?

• A) 7.1%
• B) 7.45%
• C) 7.25%
• D) 7.85%

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Definitions:

John Maynard Keynes

An economist hailing from Britain, whose groundbreaking ideas redefined the scope of macroeconomics and governmental policy initiatives.

Karl Marx

A 19th-century philosopher, economist, and revolutionary socialist who developed the theory of Marxism, focusing on the conflicts within capitalism and its eventual overthrow.

Milton Friedman

An influential American economist known for his strong belief in free-market capitalism and for his role in the development of monetarism.

Murray Weidenbaum

An economic advisor and scholar known for his work on public policy and regulation, serving as the chairman of the Council of Economic Advisers under President Ronald Reagan.