For which of the following types of funds would you typically pay the highest commission when purchasing 100 shares?

• A. An exchange-traded fund (ETF) with zero-commission trading
• B. An index fund with no transaction fees
• C. A no-load mutual fund
• D. A load mutual fund

Answer: (D)

Verified step by step guidance

1. Understand the concept of a 'load mutual fund': A load mutual fund is a type of mutual fund that charges a sales commission or fee when you purchase or sell shares. This fee is typically higher compared to other types of funds.
2. Compare the characteristics of the given fund types: Exchange-traded funds (ETFs) with zero-commission trading typically have no trading fees, index funds with no transaction fees are designed to minimize costs, and no-load mutual funds do not charge sales commissions.
3. Recognize that a load mutual fund involves a commission fee: Unlike the other fund types listed, a load mutual fund explicitly charges a fee for purchasing or selling shares, which makes it the most expensive option in terms of commission.
4. Identify the key difference: The presence of a sales commission in load mutual funds is the primary reason why they would typically result in the highest commission when purchasing shares.
5. Conclude that the correct answer is 'A load mutual fund' based on the comparison of fees and commissions across the fund types provided.