Question
Given the following information on index and mutual funds, answer the corresponding question: Initial (year 0) investment: 8,000 Annual contribution (starting year 1): 4,000 Annual
Given the following information on index and mutual funds, answer the corresponding question:
Initial (year 0) investment: 8,000
Annual contribution (starting year 1): 4,000
Annual return of S&P 500 (assume same every year to compute): 11%
Annual management fee of leading mutual fund: 1.25%
Annual management fee of leading index fund (Fidelity index fund, ticker FNILX, as an example currently has 0.00% management fees): 0.0%
Since it is very rare for an actively managed fund like a mutual fund to beat the S&P 500 over many years, we will assume the mutual fund and index mimicking the S&P 500 will have the same rate of return (for simplicity).
What is the value of the mutual fund after 40 years in this case (round your answers to the nearest cent)?
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