One Characteristic of 12(b)-1 Charges Is That They Are Payable

question 84

Multiple Choice

One characteristic of 12(b) -1 charges is that they are payable

• A)only in years that the mutual fund shows an increase in net asset value.
• B)each year regardless of the performance of the mutual fund.
• C)only during the first year the fund is owned.
• D)only when shares in the fund are sold.

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Definitions:

Covered Interest Arbitrage

A strategy in which an investor uses a forward contract to hedge against exchange rate risk when investing in foreign interest-bearing instruments.

Nominal Risk-Free Rate

The rate of return on the safest investments, such as government bonds, without adjusting for inflation.

Forward Rate

The future interest rate agreed upon in a forward contract, which is a derivative financial instrument.

Covered Interest Arbitrage

An investment strategy where an investor takes advantage of the interest rate differential between two countries while hedging exchange rate risk.