Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You must choose between a no-load, open-end mutual fund with an annual expense ratio of 0.85 percent but no transaction cost or an ETF with

You must choose between a no-load, open-end mutual fund with an annual expense ratio of 0.85 percent but no transaction cost or an ETF with an annual expense ratio of 0.25 percent and a transaction cost of $20.

a. Calculate which is the lower cost alternative to purchase.

b. Determine the lower cost to own over six months, if you sell after a 8 percent gain.

c. Calculate which is the lower cost to own over two years, if you achieve a 5 percent per year gain.

d. Calculate which is the lower cost to own over two years, if you experience a 6 percent per year loss.

a. Calculate which is the lower cost alternative to purchase. (Select the best answer below.)

A.

The cost is $0 to purchase the no-load versus $20 to purchase the ETF. Regardless of the initial investment amount, the lower cost alternative to purchase is the no-load, open-end mutual fund.

B.

The cost is $0 to purchase the ETF versus $20 to purchase the no-load fund. Regardless of the initial investment amount, the lower cost alternative to purchase is the ETF.

b. Determine the lower cost to own over six months, if you sell after a 8 percent gain. (Select the best answer below.)

A.

The lower cost to own is the no dash load fund with a cost of $ 52.28 versus the ETF at a cost of $ 55.35 .

B.

The lower cost to own is the ETF with a cost of $ 55.35 versus the no dash load fund at a cost of $ 59.58 . nbsp

c. Calculate which fund is the lower cost to own over two years, if each fund experiences a 5 percent per year gain and you sell your shares at the end of the two-year period. (Select the best answer below.)

A.

The lower cost to own is the no dash load fund with a cost of $ 218.67 versus the ETF at a cost of $ 111.78 .

B.

The lower cost to own is the ETF with a cost of $ 104.39 versus the no dash load fund at a cost of $ 218.67 . nbsp

d. Calculate which fund is the lower cost to own over two years, if you experience a 6 percent per year lossand you sell your shares at the end of the two-year period.(Select the best answer below.)

A.

The lower cost to own is the no dash load fund with a cost of $ 195.67 versus the ETF at a cost of $ 218.67 .

B.

The lower cost to own is the ETF with a cost of $ 97.64 versus the no dash load fund at a cost of $ 195.67 . nbsp

Click to select your answer.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Intelligence For HR Professionals

Authors: Karen Berman, Joe Knight, John Case

1st Edition

1422119130, 978-1422119136

More Books

Students also viewed these Finance questions

Question

4. Identify the supernatural aid in The Wizard of Oz.

Answered: 1 week ago