IFIC Mutual Funds Licensing Practice Exam · Question
What does a high Management Expense Ratio (MER) primarily indicate about a mutual fund?
The Management Expense Ratio (MER) is the total annual cost of managing and operating a fund, expressed as a percentage of the fund's average net assets. A high
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Question: What does a high Management Expense Ratio (MER) primarily indicate about a mutual fund?
Answer options:
- The fund has outperformed its benchmark significantly. ✅ The fees charged to investors are higher relative to the fund's assets.
- The fund focuses on low-cost passive investing.
- The fund's portfolio manager is highly experienced.
Correct answer: The fees charged to investors are higher relative to the fund's assets.
Explanation: The Management Expense Ratio (MER) is the total annual cost of managing and operating a fund, expressed as a percentage of the fund's average net assets. A high MER means investors are paying more in fees, which can have a significant impact on net returns.
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