Final answer:
To calculate the annual fees for a mutual fund, multiply the total value of shares owned by the fund's expense ratio. With 123 shares at a NAV of $49.50 and an expense ratio of 1.25%, the annual fees would be $76.11.
Step-by-step explanation:
Calculating the annual fees of a mutual fund based on its expense ratio is a straightforward process. First, to get the total investment in the mutual fund, you multiply the number of shares owned by the net asset value (NAV) per share. In this scenario, the investor owns 123 mutual fund shares with a NAV of $49.50 per share.
To find the total investment: 123 shares × $49.50/ share = $6,088.50.
Next, apply the fund's expense ratio to calculate the annual fees paid by the investor. The expense ratio is given as 1.25%. Therefore, the annual fees can be calculated as 1.25% of the total investment (× $6,088.50).
The calculation is: $6,088.50 × 1.25% (or 0.0125) = $76.11.
Thus, the mutual fund investor would pay annual fees of $76.11.