Discuss Finra Series-6 Exam Topic 7 Question 18

Which of the following are included in the expense ratio of a fund?

i. 12b-1 fees

ii. brokerage costs incurred by the fund when it buys and sells securities

iii. redemption fees

IV. management fees

AI and IV only

BI, II, and IV only

CI, III, and IV only

DI, II, III, and IV

Suggested Answer: A

Of the selections, only 12b-1 fees and management fees are included in the expense ratio of the fund. Brokerage costs that the fund incurs when it buys and sells securities are not included (which is why a fund's turnover ratio is important to consider.) Redemption fees are paid by the shareholder to the fund, so it would not be included in a fund's expense ratio since it is not an expense of the fund.

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11 comments · newest first

Jacquelyne 11 months ago

Yeah, I agree with B, that makes the most sense!

Sabra 12 months ago

Not sure about that, I thought those were separate.

Davida 12 months ago

Wait, redemption fees count in the expense ratio? That’s surprising!

Minna 12 months ago

I think brokerage costs should be in there too!

Miesha 1 year ago

12b-1 fees and management fees are definitely included.

Cathrine 1 year ago

I feel like all four options could be included based on what I reviewed, but I need to double-check if redemption fees really count in the expense ratio.

Hollis 1 year ago

I’m pretty confident that management fees are included, but I’m a bit hazy on whether brokerage costs are part of it or not.

Joanne 1 year ago

I think I saw a similar question where they asked about what counts in the expense ratio, and I feel like redemption fees might not be included.

Juan 1 year ago

I remember studying that 12b-1 fees and management fees are definitely part of the expense ratio, but I'm not sure about the brokerage costs.

Catalina 1 year ago

This question seems straightforward, I think I can handle it.

Alonso 1 year ago

Hmm, this looks like a tricky one. I'll need to carefully go through the given information and the formula for calculating EFP.

Finra Series-6 Exam - Topic 7 Question 18 Discussion