You are considering investing in one of several mutual funds. All the funds under consideration have various combinations of front-end and back-end loads and/or 12b-1 fees. The longer you plan on remaining in the fund you choose, the more likely you will prefer a fund with a rather than a , everything else equal.

A) 12b-1 fee; front-end load
B) front-end load; 12b-1 fee
C) back-end load; front-end load
D) 12b-1 fee; back-end load

Question

You are considering investing in one of several mutual funds. All the funds under consideration have various combinations of front-end and back-end loads and/or 12b-1 fees. The longer you plan on remaining in the fund you choose, the more likely you will prefer a fund with a ________ rather than a ________, everything else equal.

A) 12b-1 fee; front-end load
B) front-end load; 12b-1 fee
C) back-end load; front-end load
D) 12b-1 fee; back-end load

Da'San Frazier · Accepted Answer

Final Answer : B, Explanation :  If you plan on remaining in the fund for a longer period, you are less likely to sell your shares in the near future, which means you won't need to pay a back-end load. Choosing a fund with a front-end load would therefore be preferable since you will pay the fee once and then hold onto the shares. A 12b-1 fee would be an ongoing expense, and it is generally better to avoid ongoing expenses if possible.

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