Series 7 practice questionmediumPackaged Products — Mutual Funds
A client invests $100,000 in Class A shares with a 5% front-end load. How much is actually invested in the fund?
- A$95,000✓ Correct answer
- B$95,238
- C$97,500
- D$100,000
Explanation
Why A — $95,000
With a 5% front-end load on a $100,000 investment, the sales charge is $100,000 x 5% = $5,000. The amount actually invested in the fund is $100,000 - $5,000 = $95,000. The front-end load reduces the initial investment, which is why breakpoint discounts can be valuable for larger purchases.
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