Bauhinia Equity Fund sells two types of shares, A+ and A++. A+ shares are sold with front-end load fee of 8% whilst Type A++ shares are not subject to front-end load fee but are charged to investment management fee of 4% per annum as well as exit (back-end load) fee that start at 18% and reduce by 3% for each full year the investor holds the
Bauhinia Equity Fund sells two types of shares, A+ and A++. A+ shares are sold with front-end load fee of 8% whilst Type A++ shares are not subject to front-end load fee but are charged to investment management fee of 4% per annum as well as exit (back-end load) fee that start at 18% and reduce by 3% for each full year the investor holds the portfolio (until the 6th year). The annual rate of return for both types of shares is 20%.
(a) Calculate the value of Rs 150,000 investment made by investor Mr. Star in Type A+ shares if the shares are disposed after (i) 2 years and (ii) 5 years.
(b) Calculate the value of Rs 150,000 investment made by investor Mrs. Apple in Type A++ shares if the shares are disposed after (i) 2 years and (ii) 5 years.
(c) As an analyst, which types of share will you recommend the investor to buy?
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Year 5
222826.84 8% fee=17826.15= 240652.99
20%annual return(240652.99*20%).
=48130.59
Rs.288,783.58
For the above part, is the answer correct. should it not be 222,826.84 - 17,826.15 which results to 205,000.69
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