SIE practice questionmediumMutual Funds — Share Classes
An investor making a large lump-sum investment in a mutual fund would MOST likely benefit from purchasing:
- AClass B shares with a contingent deferred sales charge (CDSC)
- BClass A shares with a front-end load and breakpoint discounts✓ Correct answer
- CNo-load shares with the highest 12b-1 fees
- DClass C shares with level loads
Explanation
Why B — Class A shares with a front-end load and breakpoint discounts
For large investments, Class A shares are most cost-effective because breakpoint discounts reduce the front-end sales charge as the investment amount increases. Class B shares (A) charge a CDSC if sold early and often have higher 12b-1 fees. Class C shares (C) have ongoing level loads with no breakpoint benefit. The larger the investment, the more advantageous Class A breakpoints become.
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