LA SERIES 103 COMPLETE EXAM QUESTIONS AND 100%
VERIFIED ANSWERS LATEST VERSION 2026
1. What is a mutual fund? A mutual fund is an open-end investment company
that pools money from multiple investors to invest in a diversified portfolio of
securities, offering shares continuously and redeeming them at NAV.
2. What does NAV stand for? NAV stands for Net Asset Value, which is the
per-share value of a mutual fund calculated by dividing total assets minus
liabilities by the number of outstanding shares.
3. How is NAV calculated? NAV = (Total Assets - Total Liabilities) / Number
of Outstanding Shares
4. When is NAV calculated? NAV is calculated at the end of each business
day, typically at 4:00 PM Eastern Time when the markets close.
5. What is a load fund? A load fund is a mutual fund that charges a sales
commission (load) when shares are purchased or redeemed.
6. What is a front-end load? A front-end load is a sales charge paid when
shares are purchased, reducing the amount of the investment that goes to work
in the fund.
7. What is a back-end load? A back-end load, or deferred sales charge, is a fee
paid when shares are redeemed, typically declining over time based on how
long the investor holds the shares.
8. What is a no-load fund? A no-load fund is a mutual fund that does not
charge any sales commissions, allowing investors to buy and redeem shares at
NAV.
9. What are Class A shares? Class A shares typically charge a front-end load
but have lower annual expenses than other share classes.
10. What are Class B shares? Class B shares typically charge a back-end load
(CDSC) that declines over time and eventually convert to Class A shares after a
holding period.
,11. What are Class C shares? Class C shares typically charge a level load
(higher 12b-1 fees) annually and may have a small CDSC if redeemed within
one year.
12. What is a 12b-1 fee? A 12b-1 fee is an annual marketing and distribution
fee charged by some mutual funds, named after the SEC rule that permits it.
13. What is the maximum 12b-1 fee allowed? The maximum 12b-1 fee is 1%
annually, with a maximum of 0.75% for distribution and 0.25% for shareholder
services.
14. What is a breakpoint? A breakpoint is a dollar level of investment in a
load fund at which the sales charge is reduced.
15. What is a letter of intent (LOI)? A letter of intent allows an investor to
qualify for breakpoint discounts by committing to invest a specified amount
over a 13-month period.
16. What is a right of accumulation? Right of accumulation allows investors
to combine current holdings with new purchases to qualify for breakpoint
discounts.
17. What is breakpoint selling? Breakpoint selling is a prohibited practice
where a registered representative fails to inform a customer about available
breakpoint discounts.
18. What is a closed-end fund? A closed-end fund issues a fixed number of
shares through an IPO and trades on an exchange like a stock, with prices
determined by market forces.
19. How do closed-end funds differ from open-end funds? Closed-end funds
have a fixed number of shares that trade on exchanges at market prices, while
open-end funds continuously issue and redeem shares at NAV.
20. Can closed-end funds trade at a premium or discount? Yes, closed-end
funds can trade at a premium (above NAV) or discount (below NAV) based on
market demand.
21. What is an exchange-traded fund (ETF)? An ETF is an investment
company that trades on an exchange like a stock but typically tracks an index
and can be created or redeemed in large blocks.
, 22. What is the primary difference between ETFs and mutual funds? ETFs
trade continuously throughout the day at market prices, while mutual funds are
priced once daily at NAV and transactions occur at end-of-day prices.
23. What is an index fund? An index fund is a mutual fund or ETF designed to
track the performance of a specific market index, such as the S&P 500.
24. What is active management? Active management involves a portfolio
manager making investment decisions to try to outperform a benchmark index.
25. What is passive management? Passive management involves tracking a
market index rather than trying to outperform it, typically resulting in lower
fees.
26. What is a prospectus? A prospectus is a legal document that provides
detailed information about an investment company, including objectives, risks,
fees, and past performance.
27. When must a prospectus be delivered? A prospectus must be delivered at
or before the time of sale to a customer.
28. What is a summary prospectus? A summary prospectus is a shorter
document highlighting key information about a mutual fund that can be
delivered instead of the full prospectus.
29. What is dollar-cost averaging? Dollar-cost averaging is an investment
strategy of investing fixed amounts at regular intervals, regardless of price, to
reduce timing risk.
30. What is a systematic withdrawal plan? A systematic withdrawal plan
allows investors to receive regular periodic payments from their mutual fund
investment.
31. What is a dividend reinvestment plan? A dividend reinvestment plan
automatically uses dividends and capital gains distributions to purchase
additional fund shares.
32. What is a redemption fee? A redemption fee is a fee charged when shares
are sold, designed to discourage short-term trading (different from a CDSC).
33. What is market timing? Market timing is the practice of frequently buying
and selling mutual fund shares to take advantage of short-term price
movements, which is generally discouraged.
VERIFIED ANSWERS LATEST VERSION 2026
1. What is a mutual fund? A mutual fund is an open-end investment company
that pools money from multiple investors to invest in a diversified portfolio of
securities, offering shares continuously and redeeming them at NAV.
2. What does NAV stand for? NAV stands for Net Asset Value, which is the
per-share value of a mutual fund calculated by dividing total assets minus
liabilities by the number of outstanding shares.
3. How is NAV calculated? NAV = (Total Assets - Total Liabilities) / Number
of Outstanding Shares
4. When is NAV calculated? NAV is calculated at the end of each business
day, typically at 4:00 PM Eastern Time when the markets close.
5. What is a load fund? A load fund is a mutual fund that charges a sales
commission (load) when shares are purchased or redeemed.
6. What is a front-end load? A front-end load is a sales charge paid when
shares are purchased, reducing the amount of the investment that goes to work
in the fund.
7. What is a back-end load? A back-end load, or deferred sales charge, is a fee
paid when shares are redeemed, typically declining over time based on how
long the investor holds the shares.
8. What is a no-load fund? A no-load fund is a mutual fund that does not
charge any sales commissions, allowing investors to buy and redeem shares at
NAV.
9. What are Class A shares? Class A shares typically charge a front-end load
but have lower annual expenses than other share classes.
10. What are Class B shares? Class B shares typically charge a back-end load
(CDSC) that declines over time and eventually convert to Class A shares after a
holding period.
,11. What are Class C shares? Class C shares typically charge a level load
(higher 12b-1 fees) annually and may have a small CDSC if redeemed within
one year.
12. What is a 12b-1 fee? A 12b-1 fee is an annual marketing and distribution
fee charged by some mutual funds, named after the SEC rule that permits it.
13. What is the maximum 12b-1 fee allowed? The maximum 12b-1 fee is 1%
annually, with a maximum of 0.75% for distribution and 0.25% for shareholder
services.
14. What is a breakpoint? A breakpoint is a dollar level of investment in a
load fund at which the sales charge is reduced.
15. What is a letter of intent (LOI)? A letter of intent allows an investor to
qualify for breakpoint discounts by committing to invest a specified amount
over a 13-month period.
16. What is a right of accumulation? Right of accumulation allows investors
to combine current holdings with new purchases to qualify for breakpoint
discounts.
17. What is breakpoint selling? Breakpoint selling is a prohibited practice
where a registered representative fails to inform a customer about available
breakpoint discounts.
18. What is a closed-end fund? A closed-end fund issues a fixed number of
shares through an IPO and trades on an exchange like a stock, with prices
determined by market forces.
19. How do closed-end funds differ from open-end funds? Closed-end funds
have a fixed number of shares that trade on exchanges at market prices, while
open-end funds continuously issue and redeem shares at NAV.
20. Can closed-end funds trade at a premium or discount? Yes, closed-end
funds can trade at a premium (above NAV) or discount (below NAV) based on
market demand.
21. What is an exchange-traded fund (ETF)? An ETF is an investment
company that trades on an exchange like a stock but typically tracks an index
and can be created or redeemed in large blocks.
, 22. What is the primary difference between ETFs and mutual funds? ETFs
trade continuously throughout the day at market prices, while mutual funds are
priced once daily at NAV and transactions occur at end-of-day prices.
23. What is an index fund? An index fund is a mutual fund or ETF designed to
track the performance of a specific market index, such as the S&P 500.
24. What is active management? Active management involves a portfolio
manager making investment decisions to try to outperform a benchmark index.
25. What is passive management? Passive management involves tracking a
market index rather than trying to outperform it, typically resulting in lower
fees.
26. What is a prospectus? A prospectus is a legal document that provides
detailed information about an investment company, including objectives, risks,
fees, and past performance.
27. When must a prospectus be delivered? A prospectus must be delivered at
or before the time of sale to a customer.
28. What is a summary prospectus? A summary prospectus is a shorter
document highlighting key information about a mutual fund that can be
delivered instead of the full prospectus.
29. What is dollar-cost averaging? Dollar-cost averaging is an investment
strategy of investing fixed amounts at regular intervals, regardless of price, to
reduce timing risk.
30. What is a systematic withdrawal plan? A systematic withdrawal plan
allows investors to receive regular periodic payments from their mutual fund
investment.
31. What is a dividend reinvestment plan? A dividend reinvestment plan
automatically uses dividends and capital gains distributions to purchase
additional fund shares.
32. What is a redemption fee? A redemption fee is a fee charged when shares
are sold, designed to discourage short-term trading (different from a CDSC).
33. What is market timing? Market timing is the practice of frequently buying
and selling mutual fund shares to take advantage of short-term price
movements, which is generally discouraged.
