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NEW QUESTION: 1
Mutual fund A is a 7% load-fund, which you expect to have a rate of return of about 17%. Mutual fund B is a no-load fund, which is expected to have a rate of return of around 9%. If your investment horizon is 1 year, which fund should you invest in and what is your expected net rate of return?
A. B; 9.0%
B. A; 9.35%
C. none of these answers
D. A; 8.8%
Answer: A
Explanation:
Explanation/Reference:
Explanation:
With fund A, a deposit of $100 will give you shares worth $93 after the load charge is taken into account.
This amount is expected to grow to 93*(1+0.17) = $108.81. Thus, the net return with fund A is expected to be 8.8%. Hence, for a 1-year horizon, you should select fund B, which is expected to return 9%.

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