SIE Exam Question 426: Answer and Explanation

Question: 426

If a mutual fund purchaser signs a letter of intent in order to take advantage of a breakpoint discount, how long does he have to buy enough shares to reach the breakpoint?

• A. 25 months
• B. 13 months
• C. 9 months
• D. 90 days

Correct Answer: B

Explanation:

B: If an investor plans to reach a breakpoint within the next 13 months, he can write a letter of intent (LOI) to his broker. The LOI is a signed, nonbinding statement of the investor's intent to invest enough over the next 13 months to reach the breakpoint. In response, the broker will charge the investor the discounted sales charge on current purchases. The additional shares the customer is able to purchase due to the discount will be held aside by the mutual fund until the customer actually reaches the breakpoint.