Question
An investor is planning on investing in a mutual fund to save for college. The investor will invest $10,000 today and will need this money
An investor is planning on investing in a mutual fund to save for college. The investor will invest $10,000 today and will need this money for tuition 20 years from now. Two funds are available: MicroFund has an expense ratio of 0.7% and is expected to return 10% in investment returns every year. MacroFund has an expense ratio of 0.1% and is expected to return 9.2% in investment returns every year. If the investor is neutral between these options, and only care about returns, what is their best choice and why?
A) MicroFund is the best choice because their net expected returns are higher | ||
B) MacroFund is the best choice because their fees are lower | ||
C) MacroFund is the best choice because their net returns are higher | ||
D) Both funds have pros and cons, so the investor should be indifferent about these two funds |
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