Products & Their RisksQuestion 66 of 398
A Letter of Intent in a mutual fund purchase allows an investor to:
a.Redeem shares without any contingent deferred sales charge
b.Convert Class C shares into Class A shares automatically
c.Qualify now for a breakpoint discount by pledging to invest a set amount within 13 months
d.Receive a guaranteed rate of return over the stated period
Explanation
A Letter of Intent (LOI) lets an investor obtain the reduced sales charge of a breakpoint immediately by agreeing to invest the required amount within 13 months. If the investor fails to reach the target, the fund adjusts the sales charge on the shares already purchased. An LOI may be backdated up to 90 days.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
Related questions on this topic
- An investor plans to make a large lump-sum investment and hold it for 20 years. Which mutual fund share class is generally most cost-effective for this investor?
- Class B mutual fund shares are best described as shares that:
- An investor wants to invest a modest amount for only about two to three years. Which share class is often most appropriate?
- Breakpoints on Class A shares reduce the sales charge based on the size of the investment. Which of the following would typically qualify a purchase for a breakpoint discount?
- A registered representative recommends that a client invest $24,000, an amount just under a $25,000 breakpoint, so the transaction avoids reduced sales charges. This practice is known as:
- Shares of a closed-end investment company:
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