Question: Assume that the net return to an active fund (after fees) is 9.5% (0.79% per month) and the net return to a passive fund is

Assume that the net return to an active fund (after fees) is 9.5% (0.79% per month) and the net return to a passive fund is 10.5% (0.875% per month). Consider an investor who invests $600 per month (end-of-month) over thirty years in the passive fund. What is the future value of her savings? Now consider an investor who invests on a monthly basis over thirty years in the active fun. If the active fund investor wants the same future value as the passive fund investor, then how much more must she invest per month?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

ANSWER i FV passive 600 1000875... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

You are a team of consultants who assist organizations with budgeting, and you provide data analysis to assist with decision making. You have just been hired as a consultant by Earrings Unlimited, a...

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...

Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...

22) Actively managed mutual funds charge higher management fees than passive funds. Assume that the net return to an active fund (after fees) is 9.5% (0.79% per month) and the net return to a passive...

23) Actively managed mutual funds charge higher management fees than passive funds. Assume that the net return to an active fund (after fees) is 9.5% (0.79% per month) and the net return to a passive...

Actively managed mutual firms charge higher management fees than passive funds. Assume that the net return to an active fund (after fees) is 9.5% (0.79% per month) and the net return to a passive...

Actively managed mutual funds charge higher management fees than passive funds. Assume that the net return to an active fund (after fees) is 9.5% (0.79% per month) and the net return to a passive...

6. Actively managed mutual funds charge higher management fees than passive funds. Assume that the net return to an active fund (after fees) is 7.32 percent (0.61 percent per month) and the net...

After completing your MBA you just started your new position at your dream company. In your firm's new employee orientation you obtained a lot of information about the benefits provided by your firm...

The homogeneous cone has a conical cavity cut into it as shown. Determine the depth d of the cavity in terms of h so that the cone balances on the pivot and remains in neutral equilibrium. h Hat

New Millennium Technologies uses a standard cost system and budgeted 50,000 machine hours to manufacture 100,000 units in 2010. The budgeted total fixed factory overhead was $9,000,000. The company...

Find the sum using the formulas for the sums of powers of integers. 8 n ^ 2 n = 1

Match the following terms by entering in the blank space the letter of the phrase that best describes each term. _____________Bond indenture _____________Unregistered bonds _____________Secured bonds...

Andy Watson, CPA, is a senior auditor on the audit of Carlson, Inc. Andy is reviewing the results of analytical procedures related to inventory. For results (a), (b), and (c), select the explanation...

Determine the critical value of t in each of the following circumstances: a. 1 - = 0.95, n = 10 b. 1 - = 0.99, n = 10 c. 1 - = 0.95, n = 32 d. 1 - = 0.95, n = 65 e. 1 - = 0.90, n = 16

Steve Diezel, an employee of Island City Flying Service in Key West, Florida, stole a General Electric Credit Corp. (GECC) aircraft and crashed the plane while attempting to take off. GECC brought...

Multiple Choice Questions Select the best answer for each of the following and explain fully the reason for your selection. a. Which of the following is least likely to be among the auditors...

4-13 Consider the Win Big Gambling Club media selection example discussed in section 3.3 of Chapter 3. Use the Sensitivity Report for this LP model (shown in Screenshot 4-6) to answer the following...

Briefly explain why bonds of different maturities have different yields in terms of the expectations and liquidity preference hypotheses. Briefly describe the implications of each hypothesis when the...

Suppose that in addition to investing in one more stock you can invest in T-bills as well. Would you change your answers to Problems 17 and 18 if the T-bill rate is 8%? The correlation coefficients...

Two basic assumptions of technical analysis are that security prices adjust: a. Gradually to new information, and study of the economic environment provides an indication of future market movements....

During the morning hours at a catalogue sales department, phone calls come in at an average rate of 40 per hour. Calls that cannot be answered immediately are put on hold. The system can handle eight...

A priority system is used to process customers, who are assigned one of two classes when they enter the processing centre. The highest-priority class has an average arrival rate of four per hour; the...

Trucks arrive at the loading dock of a wholesale grocer at an average rate of 1.2 per hour in the mornings. A single crew consisting of two workers can load a truck in about 30 minutes. Crew members...