The S&P 500, a benchmark index, tracking the performance of large U.S. equities has historically returned 8.5%
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Question:
The S&P 500, a benchmark index, tracking the performance of large U.S. equities has historically returned 8.5% per annum. The average active fund manager typically earns approximately 75% of the S&P 500 and charges higher annual fees. For reference, +90% of individual, non-professional investors lose money. Calculate the accumulated account balance in 20 years based on the following assumptions.
- S&P 500 index fund generates 8.5% annual return and charges a 0.25% annual fee
- Active manager generates 75% of S&P 500 fund annual return and charges a 1.25% annual fee
- Initial investment balance = $25,000
- No additional investment after initial investment
- What is the expected annual rate of return for the S&P 500 index fund and the actively managed fund?
- What excel formula would you use to calculate the accumulated asset value? Fill in the relevant inputs below.
Rate =
Nper =
Pmt =
[pv] =
[fv] =
[type] =
Accumulated Asset Value _________________
- What is the difference of the accumulated asset value between the two investment alternatives?
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