Chapter 1. Chapter 23 (Chapter 10 Macro)

Step 1

Work It Out

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You must read each slide, and complete any questions on the slide, in sequence.

Question

Let’s see how fees can hurt your investment strategy. Let’s assume that your mutual fund grows at an average rate of 5% per year— before subtracting the fees. Using the rule of 70:

If fees are 0.5% per year, it will take p9KdnmXiVN13Vkx5 years for your money to double. (Please make sure to round your answer to the second decimal place. If your answer was 10.291, then enter 10.29.)

2:59

Correct! Using the rule of 70, the number of years to double = 70 / (5 − 0.5) = 15.56 years.

Sorry! Did you remember to subtract any fees and divide by an integer rather than a percent? To review how to use the rule of 70, please see the section “How to Really Pick Stocks, Seriously.”

Step 2

Question

If fees are 1.5% per year (not uncommon in the mutual fund industry), it will take Tu9IG1n3UyE= years for your money to double.

Correct! Using the rule of 70, the number of years to double = 70 / (5 − 1.5) = 20 years.

Sorry! Did you remember to subtract any fees and divide by an integer rather than a percent? To review how to use the rule of 70, please see the section “How to Really Pick Stocks, Seriously.”

Step 3

Question

If fees are 2.5% per year, it will take KCanRrrS1fI= years for your money to double.

Correct! Using the rule of 70, the number of years to double = 70 / (5 − 2.5) = 28 years.

Sorry! Did you remember to subtract any fees and divide by an integer rather than a percent? To review how to use the rule of 70, please see the section “How to Really Pick Stocks, Seriously.”