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What is typical of Class A mutual fund shares?
AA back-end load that falls to zero over time
BA front-end load with lower annual expenses
CNo sales load of any kind at any stage
DA 12b-1 fee above that of Class C shares
Answer & Solution
Correct answer: B. A front-end load with lower annual expenses
1. Class A shares typically charge a front-end sales load, taken at purchase.
2. In exchange they tend to carry a lower 12b-1 fee and lower annual expenses than the other classes.
3. That trade suits an investor expecting to hold for a long time, since the annual drag is smaller.
4. A contingent deferred sales load that decays to zero is the Class B pattern.
5. Class C shares tend to carry higher annual expenses than Class A or Class B, so the 12b-1 comparison runs the other way.
_Source: US SEC Office of Investor Education and Advocacy, "Mutual Funds and ETFs: A Guide for Investors", section Classes of Mutual Funds_
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