Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.75%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.25%. Assume the rate of return on both funds’ portfolios (before any fees) is 6% per year. How much will an investment of $1,000 in each fund grow to after: a. 1 year?
b. 3 years?
c. 10 years?

Loaded - Up Fund

1 Year

The value of the investment can be calculated by the formula;

= Investment*(1-front end load)*(1+r-true expense ratio)^t

Loaded-Up fund has no front end load.

r is the return

True Expense Ratio = Fees + Expense Ratio

= 1% + 0.75%

= 1.75%

= Investment*(1-front end load)*(1+r-true expense ratio)^t

= 1,000 * ( 1 + 6% - 1.75%) ^ 1

= $1,042.50

3 years

=  Investment*(1-front end load)*(1+r-true expense ratio)^t

= 1,000 * ( 1 + 6% - 1.75%) ^ 3

= $1,133.00

10 years

=  Investment*(1-front end load)*(1+r-true expense ratio)^t

= 1,000 * ( 1 + 6% - 1.75%) ^ 10

= $ 1,516.21

Economy Fund.

1 year

The same formula applies and this time because the Economy fund uses a front-load charge of 2% as well as an expense ratio of 0.25%, the formula will be;

=  Investment*(1-front end load)*(1+r-true expense ratio)^t

= 1,000 * (1 - 2%) * ( 1 + 6% - 0.25%) ^ 1

= 1,000 * 98% * ( 1 + 6% - 0.25%) ^ 1

= $1,036.35

3 years

= Investment*(1-front end load)*(1+r-true expense ratio)^t

= 1,000 * (1 - 2%) * ( 1 + 6% - 0.25%) ^ 3

= 1,000 * 98% * ( 1 + 6% - 0.25%) ^ 3

= $1,158.96

10 years

= Investment*(1-front end load)*(1+r-true expense ratio)^t

= 1,000 * (1 - 2%) * ( 1 + 6% - 0.25%) ^ 10

= 1,000 * 98% * ( 1 + 6% - 0.25%) ^ 10

= $1,714.08