The XYZ Equity Fund sells Class A shares with a front-end load of 5% and...
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The XYZ Equity Fund sells Class A shares with a front-end load of 5% and Class B shares with 12b-1 fees of 0.6% annually as well as back-end load fees that start at 4% and fall by 1% for each full year the investor holds the portfolio (until the fourth year). Assume rate of return on the fund portfolio net of operating expenses is 9% annually. (a) (9 points) What will be the value of a $10,000 investment in Class A and Class B shares if the shares are sold after (a) 2 years, (b) 3 years, (c) 10 years?
(b) (6 points) Which fee structure provides higher net proceeds at the end of each investment horizon?
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