You need to know two basic formulas to determine the sales charge and public offering price of open-end funds. The Series 7 will expect you to be prepared to use multiple formulas, but fortunately, you only need two for open-end funds.

## Sales charge percent

The sales charge, which is set at a maximum of 8-1/2 percent, is part of the public offering price (POP), or ask price, not something tacked on afterward like a sales tax.

One of the tricks for calculating the sales charge for open-end funds is remembering that the POP equals 100 percent. Therefore, if the sales charge is 8 percent, the net asset value (NAV) is 92 percent of the POP. The formula for determining the sales charge percent is as follows:

The following question tests your expertise in calculating the sales charge of a mutual fund.

ABC Aggressive Growth Fund has a net asset value of \$9.20 and a public offering price of \$10.00. What is the sales charge percent?

(A)    6.8 percent
(B)    7.5 percent
(C)    8 percent
(D)    8.7 percent

The right answer is Choice (C). The first thing that you have to do is set up the equation. Start with the POP of \$10.00 and subtract the NAV of \$9.20 to get \$0.80. Next, divide the \$0.80 by the POP of \$10.00 to get the sales charge of 8 percent:

## Public offering price (POP)

When taking the Series 7 exam, you may be asked to figure out the public offering price of a mutual fund when you’re given only the sales charge percent and the NAV.

Remember, the sales charge is already a part of the POP, so the sales charge is not equal to the sales charge percent times the NAV. Use the following formula to figure out how much an investor has to pay to buy shares of the fund when you know only the NAV and the sales charge percent: