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Mutual funds charge an annual fee, called the expense ratio, that usually ranges from about 0.4% to about 1.6% of the amount of money in
Mutual funds charge an annual fee, called the expense ratio, that usually ranges from about 0.4% to about 1.6% of the amount of money in the account at the end of the year. For instance, if the expense ratio is 0.5% and there is $10,000 in the account at the end of the year, then there would be a charge of 0.00510000=$50 in fees. Suppose that John puts $2,000 at the beginning of each year into an IRA and that the funds are invested in a mutual fund earning 8% per year, before expenses. How much more will John have at the end of 7 years if the mutual fund has an expense ratio of 0.4%, as opposed to 1.6% ? John will have \$ more at the end of 7years. (Round to the nearest cent as needed.)
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