Respuesta :
Answer:
r>8.68695%
Annual rate of return is r>8.68695%
Explanation:
The net return, the buyer will get= 1+r-0.005
Where:
r is the interest rate
0.005 is expense ratio (0.5%)
Let suppose $1 is invested, then the return after two years is as below:
[tex](1-0.04)*(1+r-0.005)^2[/tex]
Considering the annual compounding of returns, the compound interest on $1 for 2 years will be [tex](1+0.06)^2[/tex]
The fund portfolio earn for you to be better off is:
[tex](1-0.04)*(1+r-0.005)^2[/tex]>[tex](1+0.06)^2[/tex]
[tex]0.96*(r+0.995)^2>1.1236[/tex]
[tex]0.96*(r^2+1.99r+0.990)>1.1236\\0.96r^2+1.9104r+0.9504-1.1236>0\\0.96r^2+1.9104r-0.173>0[/tex]
Solving the above equation, we will get:
r>0.0868695 r>-2.0768 (Ignore this value as it is -ve
r>8.68695%
Annual rate of return is r>8.68695%
To invest or investment is termed as the process of the activity that involves the goal of the generation of the income by the appreciation in the value of an asset that has been invested with.
The annual rate of return r>8.68695%.
The net return, the buyer will get= 1+r-0.005
Where:
r is the interest rate
0.005 is expense ratio (0.5%)
Let suppose $1 is invested, then the return after two years is:
[tex](1-0.04)\times(1+r-0.005)^{2}[/tex]
Considering the annual compounding of returns, the compound interest on $1 for 2 years = [tex](1+0.06)^{2}[/tex]
The fund portfolio earns for you to be better off is:
[tex](1-0.04)\times(1+r-0.005)^{2} >(1+0.06)^{2}[/tex]
[tex]0.96\times(r+0.995)^{2} >1.1236\\0.96\times(r^{2} +1.99r+0.990)>1.1236\\0.92r^{2} +1.9104r+0.9504-1.1236>0\\0.92r^{2}+1.9104r-0.173>0[/tex]
On solving the above equation,
r>0.0868695
r>-2.0768 (Ignore this value as it is -ve)
r>8.68695%
The annual rate of return is r>8.68695%.
To know more about the calculation of the compound interest, refer to the link below:
https://brainly.com/question/20344575
