Study Question of the Month – January 2017

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Congratulations to Nelson C., this month’s Study Question of the Month winner! 

See the answer below!

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Question (Relevant to the Series 6)

Monique wants to invest in mutual fund shares, but she only plans to keep the shares for just over a year. Which shares are most suitable for Monique?

A. A shares
B. B shares
C. C shares
D. There is not enough information to answer the question.

Answer: C. C shares have no front-end or back-end charges, so breakpoints don’t apply, and there is no need to hold shares for a minimum amount of time to save money. The only exception is a 1% back-end charge if the investor redeems the shares less than a year after purchasing them. However, C shares have the highest annual 12b-1 fees, so they are not suitable for long-term investments. For Monique, however, they would work perfectly.

3 thoughts on “Study Question of the Month – January 2017”

  1. If the amount to be invested is over $1,000,000 then A shares is the best choice. If under $1,000,000 then C shares are best. Therefore, the answer should be D, not enough information.

  2. Class A shares typically charge a front-end sales charge. When you buy Class A shares with a front-end sales charge, a portion of your dollars is not invested. Class A shares may impose an asset-based sales charge (often 0.25 percent per year), but it generally is lower than the charge imposed by the other classes (often 1 percent per year for B and C shares).

    Class C shares do not impose a front-end sales charge on the purchase, so the full dollar amount that you pay is invested. Often Class C shares impose a small charge (often 1 percent) if you sell your shares within a short time, usually one year. They typically impose higher asset-based sales charges than Class A shares and, since they generally do not convert into Class A shares, those fees will not be reduced over time.

    Additionally, in most cases, your total cost would be higher than with Class A shares, and even Class B shares, if you hold for a long time

    The answer is A. A shares.

    Thank you,

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