SIE (Securities Industry Essentials) Practice Exam

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What best describes a Letter of Intent in mutual funds?

A contract to sell a set number of shares
A written indication to sell a set number of shares in the future
A written indication to purchase a set number of mutual fund shares in the future
A contract guaranteeing mutual fund performance

The correct answer is: A written indication to purchase a set number of mutual fund shares in the future

A Letter of Intent in mutual funds is a written indication to purchase a set number of mutual fund shares in the future. A is incorrect because it refers to selling rather than purchasing. B is incorrect because it refers to selling in the future, rather than purchasing. D is incorrect because a Letter of Intent does not guarantee mutual fund performance. It is simply a written indication of an intent to purchase a set number of shares in the future.