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The equity funds sell class A Share with a front load of 5% and class B share with fees of 0.
The equity funds sell class A Share with a front load of 5% and class B share with fees of 0.5% annually as well as back -end load fees that start at 5% and fall by 1% for each full year the investor holds portfolio (Until the tenth year). Assume the rate of return on fund portfolio net of operating expenses is 10% annually.
Required
(a)
1. What is the value of $100,000 investments in Class A and B shares if the share are sold after 1 year, 4 years and 10 years?
2. Which fee structure provides higher net proceeds at the end of each of (1) above investment horizons? Briefly comment on your findings
(b) The nguvumali fund had excellent investment performance last year with a portfolio return that placed it in the top 10% of all funds with similar investment policy. Do you expect it to be a best performer next year? Briefly explain any three reasons why or why not?
