A customer holds Class B mutual fund shares and has been told her shares will 'convert' after eight years. What is the PRIMARY benefit of this conversion feature?
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AThe shares convert to Class A shares, eliminating the ongoing 12b-1 fee charged on Class B shares
BThe investor receives a cash distribution equal to the deferred sales charge avoided
CThe shares are exchanged into a money market fund automatically
DConversion resets the holding period for capital gains tax purposes
✓ Correct answer: A. The shares convert to Class A shares, eliminating the ongoing 12b-1 fee charged on Class B sharesClass B shares typically convert to Class A shares after a set holding period, after which the higher 12b-1 fee assessed on Class B shares is replaced by the lower Class A 12b-1 fee, reducing ongoing fund expenses for long-term holders.
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