Redemption
Chapters in this video
- 0:00 The redemption puzzle at NAV minus back-end charges
- 1:34 Seven calendar days and suspension exceptions
- 2:37 Tendered for redemption vs. tender offer
- 3:06 CDSC calculation on lesser of purchase price or NAV
- 4:47 Two-step redemption order: non-charged shares then FIFO
- 5:24 Four systematic withdrawal plan types and the churning trap
- 7:05 Class B to Class A conversion: lower 12b-1 fee, zero tax
- 8:19 Rapid-fire exam recap
What this video covers
- Why open-end fund redemptions are paid at net asset value (NAV) within 7 calendar days, not business days, and the three extraordinary circumstances that allow suspension
- How the contingent deferred sales charge (CDSC) is always calculated on the lesser of original purchase price or current NAV, protecting appreciation from the fee
- The strict two-step redemption order: non-charged shares (like reinvested dividends) redeem first, then charged shares follow First In, First Out (FIFO)
- The four systematic withdrawal plan types (fixed-dollar, fixed-share, fixed-percentage, fixed-time) and why simultaneous purchase during withdrawal is churning
- Why Class B shares convert to Class A after 6 to 8 years to lower the 12b-1 fee, and why this reclassification is not a taxable event
- The exam vocabulary distinction between shares tendered for redemption (open-end standard process) and a voluntary tender offer (closed-end occasional mechanism)
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