26 February, 13:13

# At the beginning of the year, you invest \$10,000 in an S&P 500 index fund. This fund charges an annual fee of 0.1% of your end-of-year assets at the end of the year. Your friend invests \$10,000 in an actively managed fund that charges 1.4% of end-of-year assets at the end of the year. Before fees are taken into account, the index fund is up 9.0% at the end of the year while the actively managed fund is up 9.5%. After fees, how does your performance compare to your friend's?

+1
1. 26 February, 14:42
0
we can say that we are are \$92.40 richer

Explanation:

given data

invest = \$10,000

annual fee = 0.1%

index fund = 9.0%

friend invests = \$10,000

charges = 1.4%

actively managed fund = 9.5%

to find out

solution

we get here both performance and than compare by subtract them by each other

first we get here our performance that is = \$10,000 * (1 + 9%) * (1-0.1%) ... 1

and friend performance that is \$10,000 * (1 + 9.5%) * (1 - 1.4%) ... 2

now subtract equation 1 by 2

= \$10,000 * (1 + 9%) * (1-0.1%) - \$10,000 * (1 + 9.5%) * (1 - 1.4%)

= \$92.40

so we can say that we are are \$92.40 richer