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Future Value

Consider the following four investments.
a) You invest $3,000 annually in a mutual fund that earns 10% annually, and you reinvest all the distributions. How much will you have in the account at the end of 20 years?
b) You invest $3,000 annually in a mutual fund with a 5% load fee so that only $2,850 is actually invested in the fund. The fund ears 10% annually, and you reinvest all the distributions. How much will you have in the account at the end of 20 years? (Assume that all distributions are not subject to the load fee.)
c) You invest $3,000 annually in no-load mutual fund that charges b-1 fee of 1%. The fund earns 10% annually before fees, and you reinvest all distributions. How much will you have in the account at the end of 20 years?
d) You invest $3,000 annually in no-load mutual fund that has a 5% exit fee. The fund earns 10% annually before fees, and you reinvest all distributions. How much will you have in the account at the end of 20 years?

Solution Preview

a) In this case have to calculate the future value of annuity. The annuity amount is $3,000, time period is 20 years and the rate is 10%
FV at the end of 20 years = 3,000 X FVIFA (20,10%) = 3,000 X 57.2750 = $171,825
Amount at the end of 20 years will be ...

Solution Summary

The solution explains how to calculate the future value of the given investment options

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