Pioneer Fund charges a 12b-1 fee of 1.0% and maintains an expense ratio of 0.75%.
Preserver Fund charges a front-end load of 2% and an expense ratio of 0.25% but no 12b-1 fee.
Assume the rate of return on both funds’ portfolios (before any fee) is 6% per year. How much will an investment of $100 in each fund grow to after?
(a) 1 year;
(b) 3 years;
(c) 10 years;
(d) which fee structure design attracts the long-term clients?