An investor is comparing Class A and Class C mutual fund shares for a projected 18-month holding period with a $20,000 investment. Which statement MOST accurately describes Class C shares for short-term investors?
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AClass C shares convert to Class B shares after one year, reducing long-term costs
BClass C shares impose the highest front-end sales charge but no 12b-1 fees
CClass C shares may be more cost-effective for short-term holders because they typically have no front-end load, though they carry higher ongoing 12b-1 fees
DClass C shares always result in lower total costs than Class A shares regardless of holding period
✓ Correct answer: C. Class C shares may be more cost-effective for short-term holders because they typically have no front-end load, though they carry higher ongoing 12b-1 feesClass C shares carry no front-end load and usually a small or no back-end load after one year, but their higher 12b-1 fees make them costlier than Class A for long-term holders; for an 18-month horizon, the absence of an upfront charge may yield lower total costs.
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