Question

The Wildwood Fund sells Class A shares with a front-end load of 5% and Class B Shares with a 12b-1 fees of 1% annually. If you plan to sell the fund after 4 years, are Class A or Class B shares the better choice? Assume a 10% annual return net of expenses.

Answer 1

Answer:

it is best to invest in class  B

Step-by-step explanation:

GIVEN DATA:

Class A share 5%

Class B share 1 % annually

duration of shares 4 year

Annual return is 10%

for investing in Class B for a duration of 4 year

the total  12b-1 fees at 1 % annually is $1\% \times 4 =  4\%$

This value come out to be less than class A front end fees that is given as 5%. therefore it is best to invest in class  B