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If a mutual fund does not charge a fee when the fund is purchased, It is called a _______.

a) no load
b) load
c) no load
d) load

1 Answer

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Final answer:

A mutual fund that does not charge a fee when the fund is purchased is called a no-load fund. The term no-load refers to the absence of a sales charge or commission, distinguishing it from load funds which do charge such fees. Investors generally prefer no-load funds for their cost efficiency.

Step-by-step explanation:

If a mutual fund does not charge a fee when the fund is purchased, it is called a no-load fund. The correct answer to the question is option a) no load. Mutual funds that do not charge upfront fees are referred to as no-load funds because they do not include a sales charge or commission which investors often pay when buying shares in a mutual fund.

A load fund, on the other hand, charges a fee at the time of purchase, sale, or both. No-load mutual funds are considered more cost-efficient for investors because they can invest directly into the fund without the additional cost of a load. While no-load funds can still charge other types of fees, such as annual management fees or distribution and services (12b-1) fees, they do not include the specific sales charge that is associated with load funds. Choosing between no-load and load funds will depend on a variety of factors including the investor's financial goals, investment horizon, and the specific terms and costs of the mutual fund.

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