Series 7 practice questionhardPackaged Products — Mutual Funds
A client wants to invest $50,000 in the ABC Growth Fund (Class A). The breakpoint schedule shows: under $25,000 = 5.75% load; $25,000-$49,999 = 5.00%; $50,000-$99,999 = 4.50%. What is the dollar amount of the sales charge?
- A$2,250✓ Correct answer
- B$2,375
- C$2,500
- D$2,875
Explanation
Why A — $2,250
Since the client is investing exactly $50,000, they qualify for the $50,000-$99,999 breakpoint with a 4.50% sales load. The sales charge is $50,000 x 4.50% = $2,250. The actual amount invested in the fund would be $50,000 - $2,250 = $47,750. It is a suitability violation (breakpoint selling) to recommend an investment just below a breakpoint level.
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