Q:
Harry began a front-end load contractual plan, calling for $100 a month for 10 years. After 10 investments, he decides to cancel the plan when the NAV of the shares is $530. What will be the total amount of his cancellation check?
A) $880
B) $530
C) $605
D) $1,030
A:
The correct answer is A)
In a front-end load contractual plan, the investor will receive the NAV plus all sales charges greater than 15% of the gross investment after 45 days up to 18 months. Harry’s gross investment was $1,000; the plan company had taken 50% of that, or $500. The plan company can only keep an amount of the sales charge equal to 15% of the gross. The excess taken is added to the NAV and refunded. $1,000 × 15% = $150 that the plan company keeps. The company has taken $500 and must refund the excess. $500 - $150 = $350 sales charges refunded, + $530 NAV = $880.

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RELATED TERMS
  1. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  2. Indicative Net Asset Value - iNAV

    A measure of the intraday net asset value (NAV) of an investment, ...
  3. Load

    A sales charge or commission charged to an investor when buying ...
  4. Back-End Load

    A fee (sales charge or load) that investors pay when selling ...
  5. Load Fund

    A mutual fund that comes with a sales charge or commission. The ...
  6. Periodic Payment Plan

    A type of investment plan, often sold to military personnel, ...

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