Breakpoints exist to encourage investors to make larger mutual fund share purchases. For example, a mutual fund company may lower the front-end sales load on class A shares by half a percent for every additional $25,000 of share purchases. An investor may be able to obtain this discount by signing a letter of intent. This is a commitment to make a certain amount of deposits in a designated time frame in order to obtain the favorable sales load. However, failure to make the specified purchases as outlined in the letter of intent will result in the loss of discount, and the mutual fund company will require additional payment to reflect the higher sales load associated with smaller purchases.
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