The Wildwood Fund sells Class A shares with a front-end load of 5% and Class B Shares with a 12b-1 fee of 0.5% annually and a back-end load that start at 7% and fall by 1% for each full year the investor hold the fund. If you plan to invest $20,000 and sell the fund after 4 years, are Class A or Class B shares the better choice for you? What if you plan to sell after 15 years?

Class A is better because it makes more value than Stock B.

Explanation:

Assuming stock is invested at 10%

Investment = $20,000

Investment after back-end load = $20,000 - $20,000 (0.05) = $19,000

Class A

After 15 years = Investment after front-end load x (1 + r) ^n

After 15 years = $19,000 x (1.1) ^15

After 15 years = $79,368

Class B

Rate of return Net of 12-b1 fee = 10% - 0.5% = 9.5%

After 15 years = 20,000 x (1.095) ^15

After 15 years = $78,026

Class A is better because it makes more value than Stock B.