mar350

AMA Wrote:
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> janakisri Wrote:
> --------------------------------------------------
> -----
> > pfcfaataf , u got something there . It should
> add
> > if expenses based on beginning values
>
> Is there any rationale behind this ? CFAI did not
> indicate explictly, this confuses us !

it is simple math

1)fee on beginning value
T0 value = 100 $
fee = 1% = 1 $
net req. return=5%=5 $
T1 total value to cover req. return and fee = 100+1+5=106 .... 6 % return incl. fee

2)fee on ending net value
T0 value = 100$
net req. return = 5 % = 5
T1 net value = 100+5=105=100x(1+0.05)
fee = 1% = 105 x 1% = 1.05$
T1 gross value = 100+5+1.05=100x(1+0.05)x(1+0.01)=100x1.0605=106.05

3)fee on ending gross value
gross ending value x (1-fee%)=beginning value x (1+net req. return%)
gross return = (1+ net req. return)/(1-fee%)=6.06 %

I am sorry I should not start this. Just forget it, too much material to study, we do not need to add more.