SIE practice questionmediumMutual Funds — Exchange Privilege
A mutual fund exchange privilege allows an investor to:
- AExchange shares for shares in any mutual fund regardless of fund family
- BExchange mutual fund shares for individual stocks
- CDefer all taxes on any gains indefinitely
- DSwitch from one fund to another within the same fund family, typically without paying an additional sales charge✓ Correct answer
Explanation
Why D — Switch from one fund to another within the same fund family, typically without paying an additional sales charge
The exchange privilege lets investors switch between funds within the same fund family (e.g., from a growth fund to a bond fund) usually at NAV without an additional sales charge. However, exchanges are TAXABLE events — any gain on the redeemed shares must be reported. Exchanges to funds in different families (A) would require a new purchase and potentially a new sales charge.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Companies & Packaged Products questions