You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?

A) 7.1%
B) 7.45%
C) 7.25%
D) 7.85%

Expense Ratio

A measure reflecting the annual cost of investing in a mutual fund or ETF, expressed as a percentage of assets under management.

12b-1 Fee

A fee charged by some mutual funds to cover promotion, distribution, and marketing expenses.

Bank CD

A Certificate of Deposit, a savings certificate with a fixed maturity date and specified fixed interest rate, offered by banks.