Redemption fees are commonly charged when selling shares of which investments?

• A. Savings accounts
• B. Government bonds
• C. Certificates of deposit
• D. Mutual funds or annuities

Answer: (D)

Redemption fees are charges aimed at discouraging rapid withdrawals and recovering the costs of liquidity when investors sell soon after buying. They are most commonly encountered with shares in mutual funds and with early withdrawals from deferred annuities. In mutual funds, a redemption fee (sometimes called a back-end load or CDSC) applies if you sell within a set period after purchase and usually decreases or disappears after time. In annuities, surrender charges apply if you terminate the contract or withdraw funds during the early years. Savings accounts and government bonds typically don’t impose redemption fees when you sell or withdraw, and certificates of deposit impose early withdrawal penalties rather than a redemption fee on fund shares. So the best fit for this concept is mutual funds or annuities.