What is the total sales charge for an individual who invests $150,000 in a mutual fund with a letter of intent?

To understand how to determine the total sales charge for an individual investing $150,000 in a mutual fund under a letter of intent, it's important to know how sales charges, also known as loads, are calculated.

In mutual funds, the sales charge is typically assessed as a percentage of the amount invested when purchasing shares. In the context of a letter of intent (LOI), which allows investors to commit to a certain investment amount over a specified period (usually 13 months), funds may offer a reduced sales charge based on the total anticipated investment.

For this case, assume the mutual fund has a breakpoint scale where the sales charges decrease as the investment amount increases. For example, let’s say the sales charge is set at 3.5% for investments between $100,000 and $250,000.

To calculate the sales charge:

1. Determine the sales charge percentage applicable to the investment. If the 3.5% is indeed the correct percentage for an investment of $150,000, you would calculate it as follows:

Sales Charge = Investment Amount x Sales Charge Percentage

Sales Charge = $150,000 x 0.035 = $5,250

This means the individual who invests $150