Question
You have $7,200 to invest and must choose between a no-load, open-end mutual fund with an annual expense ratio of 0.85% but not transaction cost
You have $7,200 to invest and must choose between a no-load, open-end mutual fund with an annual expense ratio of 0.85% but not transaction cost and an ETF with an annual expense ratio of 0.25% and a transaction cost of $20.00.
A. Calculate which is the lower cost alternative to purchase.
B. Calculate the nest proceeds associates with each option if you hold the mutual fund for 6 months and sell after an 8% gain.
C. Calculate the net proceeds associated with each option if you hold the mutual fund for 1 year and achieve a 7% per year gain.
D. Calculate the net proceeds associated with each option if you hold the mutual fund for 1 year and experience a 6% per year loss.
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