nanagardiner08
24.05.2020 •
Business
NGPF Activity Bank
Investing
CALCULATE: Investment Fees
Part I: Fees in 1st year
Suppose Adrian and Clemens each invest $10,000. Adrian invests in an actively managed mutual fund that has an annual expense ratio (a fee charged by the investment manager) of 1.3%. Clemens invests in a passively managed index fund linked to the S&P 500 that has an expense ratio of 0.2%. Both investments earn a 7% rate of return.
How much does each investor make on his investment with the 7% rate of return?
How much does Adrian pay in fees for his actively managed mutual fund?
How much does Clemens pay in fees for the index fund?
At the end of the year, what’s the total value (AFTER FEES) of Adrian’s mutual fund?
What’s the total value (AFTER FEES) of Clemens’s index fund?
How much more value does Clemens’s investment generate than Adrian’s in one year’s time?
Part II: Fees over many years
Let’s think of it another way so that we can see the impact of compounding on this investment. For simplicity’s sake, we’ll assume that Adrian’s rate of return is effectively 5.7% annually (7% - 1.3% fee) and Clemens’s rate is effectively 6.8% annually (7% - 0.2% fee). Each man contributes an additional $100/month into their investment account. Use the compound interest calculator to answer these questions. You can round to the nearest whole dollar and assume the investment compounds annually.
How much will Adrian have if he allows his investment to remain in the mutual fund for 10 years?
How much will Clemens have if he allows his investment to remain in the index fund for 10 years?
How much more value does Clemens’s investment generate than Adrian’s in 10 years’ time?
What about over 40 years’ time?
Part III: Summary
What’s the effect of choosing an actively managed fund over a passively managed one?
Give possible reasons, despite what you’ve seen in the exercise above, why some investors still opt for an actively managed fund.
Solved
Show answers
More tips
- L Leisure and Entertainment What can be considered an antique: defining and valuing old objects...
- F Family and Home What Kind of Wedding to have After 11 Years of Marriage?...
- C Computers and Internet How to Top Up Your Skype Account Without Losing Money?...
- P Philosophy Unidentified Flying Object - What is the Nature of this Phenomenon?...
- F Family and Home Protect Your Home or Apartment from Pesky Ants...
- O Other What is a Disk Emulsifier and How Does it Work?...
- F Family and Home What does a newborn need?...
- F Family and Home Choosing the Right Car Seat for Your Child: Tips and Recommendations...
- F Food and Cooking How to Get Reconfirmation of Registration?...
Answers on questions: Business
- B Business As an organization becomes more organic, its chain of command becomes shorter ....
- B Business Talk to me boys please...
- M Mathematics Isabella and her brother, Santiago, want to make their grandma s famous fruit salad, but they can t remember how to make the honey-lime dressing. They decide to make two...
- B Business 1 points Time Remaining 3 hours 32 minutes 11 seconds03:32:11 eBookPrintReferencesItem 31 Time Remaining 3 hours 32 minutes 11 seconds03:32:11 A is a private investment...
- B Business Volvo: The Volvo Group s vision is to become the world leader in sustainable transport solutions by creating value for customers in selected segments, pioneering products...
- M Mathematics Write a fraction with a denominator of 4 and a numerator of 7...
- M Medicine typical american diets tend to promote a chronic state of inflammation, which likely contributes to risk for many chronic diseases. classify the following dietary components...
- E English Inthefirstparagraph,theword processional (line13)mostnearlymeans:...
- S Social Studies Cooperative learning has primarily been successful in a. creating learning opportunities for students with disabilities but has been ineffective for non disabled students....
- G Geography 1. Two landscape regions are shown. Clin Talus slope Clift Sandstone Slump block The evidence shown indicates that currently each landscape region is being modified primarily...
Ответ:
determine cash investing and financing transactions made during the period.
Explanation:
When you analyze the statement of cash flows, you can determine and predict how will operating cash flows be in the future. E.g. a project is generating high amounts of cash, so you can predict that it will continue to do so for some time. But what you cannot predict or even compare is related to the financial and investing transactions that the company will make in the future. E.g. by analyzing a cash flow you cannot know if the company will decide to invest in other projects or will it decide to issue more stocks.