Imagine that you want to invest $1,000 in a new mutual fund that is highly recommended to you by your stockbroker. There is a front-end load of 5%. In the course of the next year, the value of the fund goes up 10%. Approximately how much money do you have in your account?

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Lilah Middleton

23 February, 13:28

Imagine that you want to invest $1,000 in a new mutual fund that is highly recommended to you by your stockbroker. There is a front-end load of 5%. In the course of the next year, the value of the fund goes up 10%. Approximately how much money do you have in your account?

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Answers (1)

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Isis Lynch · Answer 1

Answer: $1,045

Explanation:

A Front - End load is a type of Commission that is applied to the initial purchase of an investment.

It is usually used by Mutual funds and is deducted from the initial deposit, or purchase funds and, as a result, lowers the amount of money actually going into the investment product.

With a front end load of 5% deducted then we have,

= 1,000 (1 - 0.05)

= $950

You have $950 for investments.

Now, the fund goes up by 10% which is,

= 950 * (1+0.1)

= $1,045

$1,045 is the amount you have in your account.