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B1 Fund A charges a 12b-1 fee of 0.5% and maintains an expenses ratio of 0.4%. Fund B charges a front-end load of 5% with
B1 Fund A charges a 12b-1 fee of 0.5% and maintains an expenses ratio of 0.4%. Fund B charges a front-end load of 5% with nil 12b-1 fee and an expenses ratio of 0.3%. The gross rates of returns for Fund A and Fund B (before any fees) are both 10% per year. Required: (a) Calculate the 3-year and 5-year holding period percentage return of investing in these two funds respectively. (4 marks) (b) Identify and explain briefly whether Fund A or Fund B will be chosen in this case. (2 marks) (c) Explain the different performance between Fund A and Fund B calculated in part (a). (4 marks)
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