Calculate Future Value based on non-constant payments (dates known) and known annual rate of return

Harryf

New Member
Joined
Aug 31, 2013
Messages
39
Hi All!

I have found some hints at a solution, but none that addresses my question specifically. I eventually decided to ask for help, so here goes...

Imagine the following scenario: I have an investment (unit trust) with four capital payments that were made on various known dates. The investment company says in a value statement that the annual internal rate of return is x%, taking into account all cash flows during the investment period. The cash flows include monthly management and financial advice fees. These fees are calculated and charged monthly, but based on an annual rate of 2.6% of the fund value at the time of the monthly calculation.

Assume capital amounts were paid into the investment at the following dates:
24/05/2012 (also the start date of investment - amount 350,000), then 04/07/2017 (capital amount 1,000,000), 05/07/2017 (capital amount 1,000,000), 06/07/2017 (capital amount 1,000,000)and 07/07/2017 (capital amount 100,000). Total capital payments: 3,450,000. The value of the investment on 12/04/2021 amounts to 4,588,678.03.

The investment company says the annual IRR over the period 01/05/2012 up to 12/04/2021 is 6.73%. My calculations agree with that.

NOW FOR MY QUESTION: I would like to calculate what the fund value would have been on 12/04/2021 had the fees been 1.6% per annum calculated monthly, and not the current 2.6%, i.e. 1%-point less fees per annum.

I do not even know whether one can assume that the annual rate of return would jump to 7.73% (the 6.73% above plus the 1% saving in fees = 7.73%) if the fees are 1% less or whether this is incorrect assumption...

How should I go about calculating my answer, please?

Thank you!

Harry
 

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