Question

Which of the following is NOT a mutual fund charge/fee

A.
12b-1 charges

B.
Front-End load

C.
Back-End load

D.
Prepayment fee

Answer 1

Ans : D - Prepayment Fee

Prepayment fee is kind of penalty charged by lenders for repaying the loan amount in part or full earlier than the agreed teure. This is a kind of measure to protect the lenders for loosing their interest income. Usually this prepayment penalty is charged when the loan is paid off by the borrower with in five years. So this charge is NOT a mutual fund charge or fee.

The following charges are related to a mutual fund

12b-1 Charge : Every Mutual fund has Marketing fee, distribution expenses and service fee all these expenses are charged to the investors as a percentage of a fund's net assets.

Front End Load : It is a type of fee usually charged while pruchasing a mutual fund. Usually these charges are paid to a third party a financial institution or broker who finds the investor a better fund to his needs.

Back End Load : It is a fee charged to the investor by the fund house when he redeems or sells a mutual fund. These charges are heavier in the initial years of the fund and gradually decreases over the period.