The 12b-1 fee covers_____________:
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A. B. C. D.A
The 12b-1 fee is an ongoing fee that mutual funds charge their investors, usually on an annual basis, to cover various expenses. The fee is named after the SEC rule that allows mutual funds to charge it, Rule 12b-1.
Option A, "Fund's distribution and advertising cost," is the correct answer. The 12b-1 fee is typically used to cover the costs associated with marketing and distributing the mutual fund, such as advertising, sales commissions, and other promotional expenses. These costs can include expenses related to print and online advertising, sales literature, and other marketing efforts to promote the mutual fund to investors. The 12b-1 fee can also cover expenses related to paying brokers and financial advisors who sell the fund, as well as compensating those who provide ongoing advice to investors.
Option B, "Investor education," is not correct. Although mutual funds may provide investor education materials, the 12b-1 fee is not used to cover these costs.
Option C, "Fund manager's travel expenses," is also not correct. The 12b-1 fee is not typically used to cover the fund manager's travel expenses or any other expenses related to managing the fund.
Option D, "Brokerage expenses," is also not correct. Brokerage expenses are typically separate from the 12b-1 fee, although some mutual funds may charge other types of fees, such as a shareholder servicing fee or a record-keeping fee, which could cover these costs.
In summary, the 12b-1 fee covers the distribution and advertising costs associated with a mutual fund, as well as sales commissions, broker compensation, and other related expenses.