Test your knowledge

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Front-end sales loads apply when you _______ mutual fund shares.

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Buy

Sell

Redeem

Buy. Front-end loads, or sales charges, are charged when you buy mutual fund shares.

If a mutual fund does not charge a sales load, it may compensate its brokers through 12b-1 fees.

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True

False

True. Some people call 12b-1 fees hidden loads because they compensate brokers in this way.

Why might you as an investor favor low-cost funds?

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Because the less money you pay in expenses, the more money that goes to you

Because low-cost funds tend to perform better than high-cost funds

Both of the above

None of the above

Both of the above. Because the less the fund charges, the more you get to keep, and the better your returns tend to be.

You may be assessed an exchange fee when you put your earned dividends back into your mutual fund.

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True

False

False. You may be charged a sales load on reinvested dividends, but not an exchange fee.

Redemption fees cover the _______ of mutual fund shares.

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Buying

Maintaining

Selling

Selling. Redemption fees are charged when you sell, or redeem, shares back to a fund.

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