Question

Let’s think of it another way so that we can see the impact of compounding on this investment. For simplicity’s sake, we’ll assume that Adrian’s rate of return is effectively 5.7% annually (7% - 1.3% fee) and Clemens’s rate is effectively 6.8% annually (7% - 0.2% fee). Each man contributes an additional $100/month into their investment account. Use the compound interest calculator to answer these questions. You can round to the nearest whole dollar and assume the investment compounds annually.

Answer 1

annex the questions of the questionnaire because it is incomplete and the answers are made below

Explanation:

7. Value of adrian investment in 10 years =

$10000(1+0.057)^10 = $17,408

8. Value of Clemen's investment in 10 years =$10000(1+0.068)^10 = $19,306

9. Additional value of Clemen's investment

over Adrian's investment over 10 years time = $19306-$17408= $1,898

10. Value of Adrain investment in 20 years =$10000(1+0.057)^20= $30,303 Value of Clemen's investment in 20 years =$10000(1+0.068)^20= $37,275

Additional value of Clemen's investment

over Adrian's investment over 20 years time = $37275-$30303= $6,972

11. We can deduce that an actively managed fund charges more brokerage than a passively managed fund.

12. The best reason to choose an actively managed fund is that it has potential

of giving higher returns than index funds (passively managed funds)