How is a mutual fund's public offering price (POP) determined?

• A. POP equals net asset value (NAV) per share plus any applicable sales charges.
• B. POP equals NAV per share minus fees.
• C. POP equals the fund's market price on an exchange.
• D. POP equals the fund's annualized yield.

Answer: (A)

The price you pay to buy shares directly from a mutual fund (in the primary market) is the public offering price, which is the fund’s per-share value plus any sales charge. The per-share value used is the net asset value (NAV), and the sales charge is the fee the fund adds for selling shares to new investors. So, POP = NAV + sales charge. If there’s no sales charge (a no-load fund), the POP simply equals the NAV. This is different from a fund’s market price on an exchange or its yield, which are not used to set the purchase price in the primary market.