Mutual funds can charge sales fees in one of three ways: front-end loads, 12b-1 fees (annual), or de

Mutual funds can charge sales fees in one of three ways: front-end loads, 12b-1 fees (annual), or deferred (that is, back-end) load fees. Assume the RSG fund has an average annual NAV growth of 12 percent per year, and offers its investors a choice of the following fee arrangements:A 3 percent front-end loadA 0.50 percent annual deduction, orA 2 percent back-end load, paid at the time the investor liquidates their position. Given the assumptions above:If you start with $100,000 in initial capital, what would an investment in RSG be worth in three years under each of the proposed sales fee schemes. Which scheme would you choose, and why?If your investment horizon were 10 years, would your answer to Part (a) change? Demonstrate.Explain the relationship between the timing of the sales charge and your investment horizon. In general, if you intend to hold your position for a long time, which fee arrangement would you prefer, and why?

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