Investment Company and. Variable Contracts Products Principals (Series 26) Practice Exam

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When exchanging mutual funds at NAV, how long must the exchange take place after the redemption?

10 days
20 days
30 days
60 days

The correct answer is: 30 days

When exchanging mutual funds at net asset value (NAV), it is essential to adhere to the specific timing guidelines established by mutual fund companies. In this context, the exchange must occur within 30 days after the redemption of the initial mutual fund. This ensures that the investor can capture any potential market movements or perform strategic portfolio adjustments without incurring excessive delays. The 30-day window is a common industry practice that allows for flexibility in reinvestment of proceeds from a redemption while still optimizing tax implications and maintaining liquidity. Understanding the rationale behind this timeframe is vital for anyone involved in managing or advising on mutual funds, as it impacts investment strategy and operational efficiency.