SIE Understanding Products and Their Risks Practice Question 50

Correct Answer: D

Explanation:

D: Choice D is correct because the cost of record-keeping is covered by the service fee. Choice A is incorrect because the up-front sales load is not included in the calculation of the Expense Ratio, as the Expense Ratio is made up of ongoing fees: the management fee, service fee, and 12b-1 fee. Each of these is an annual percentage of NAV, deducted from the fund on a daily basis. Choice B is incorrect because, due to economies of scale, the management fee is usually a smaller percentage of net asset value (NAV) in a large fund, as compared with a small fund. Choice C is incorrect because the company does calculate the performance of the investor's shares. The cost of doing this is covered by the service fee.