FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationProcessing Customer Orders and TransactionsEasy
A client decides to purchase shares of an open-end investment company. The public offering price (POP) for these shares is determined by the Net Asset Value (NAV) plus which of the following?
- AA sales charge.
- BA redemption fee.
- CA 12b-1 fee.
- DA management fee.
Show answer & explanationAnswer & explanation
Correct answer: A. A sales charge.
For open-end mutual funds with a front-end load, the Public Offering Price (POP) is calculated as the fund's Net Asset Value (NAV) per share plus any applicable sales charge.
Why the other options are wrong
- B. Redemption fees are subtracted upon sale, not added to purchase price.
- C. 12b-1 fees are ongoing expenses deducted from fund assets, not added to the initial purchase price.
- D. Management fees are deducted from the fund's assets, not added to the purchase price.
Public Offering Price (POP)
The price at which new shares of an open-end mutual fund are sold to the public, equal to NAV plus sales charge.
- Applies to 'loaded' mutual funds.
- NAV is the fund's asset value per share.
- Sales charge compensates distributors.
Memory trick: NAV is the base, sales charge adds the chase.