SIE Understanding Products and Their Risks Question 13: Answer and Explanation

Question: 13

Which of the following mutual fund share class would be expected to have the highest cumulative sales charge, considering the longest reasonably possible investment horizon?

• A. Class A
• B. Class B
• C. Class C
• D. Class T

Correct Answer: C

Explanation:

C: Class C has fewer sales charges early in the holding period, but the unending, ongoing 12b-1 fees can be expected to accumulate to more than any up-front sales charge, combined with the relevant contingent deferred sales charge (CDSC). Choice A reflects shares with a potentially higher up-front sales charge, 12b-1 fees that will stop, and no CDSC. Choice B reflects shares that have no up-front sales charge or CDSC and, if held long enough, 12b-1 fees that are waived. Choice D reflects shares with a lower maximum up-front sales charge, lower 12b-1 fees, and no CDSC.