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Funds 107: Mutual Fund Expenses

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1.
Sales charges cover the ________ of mutual fund shares.
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Buying and selling. Sales charges are levied for both buying and selling shares.
2.
A mutual fund may legally charge 12b-1 fees up to 1.25 percent of a mutual fund's assets.
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False. The legal limit is 1 percent per year.
3.
A redemption fee that falls from 4 percent one year to 3 percent the next year and 2 percent the year after that is a contingent deferred sales charge.
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True. Contingent deferred sales charges drop a little each year.
4.
A 1.5% expense ratio is acceptable for which type of fund?
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A foreign-stock fund. You should expect to pay less for fund types with a narrow range of returns, such as bond or large-cap stock funds. Look for funds with expense ratios of 1% or less. The range of returns is wider for small-cap or foreign funds, so you should expect to pay more.
5.
What is the name of the expense that compensates those who administer a mutual fund?
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Management fee. This fee pays for those who run funds.