Pricing of Investment Company Securities

Series 6 candidates need to understand how investment company securities are priced because pricing errors can turn into both exam misses and customer misunderstandings. Net asset value, public offering price, and sales charge are central concepts. The candidate should know which figure reflects the portfolio value and which figure reflects the customer’s purchase price.

This topic is often tested through simple calculations and through concept questions. A customer buys at POP when a sales charge applies, not just at NAV. The sales charge is the spread between the purchase price and the underlying fund value.

[ \text{NAV} = \frac{\text{Assets} - \text{Liabilities}}{\text{Shares Outstanding}} ]

[ \text{POP} = \frac{\text{NAV}}{1-\text{Sales Charge Percentage}} ]

Key Takeaways

• NAV reflects the fund’s per-share value after liabilities.
• POP reflects what the customer pays when a sales charge applies.
• The strongest Series 6 answer usually distinguishes product value from customer purchase price.

Sample Exam Question

Why does Series 6 distinguish NAV from POP?

A. Because they are always identical for front-end sales-charge funds
B. Because NAV reflects fund value while POP reflects the customer’s purchase price when a sales charge is included
C. Because POP applies only to retirement accounts
D. Because NAV can be used only for exchange-traded funds

Answer: B. Series 6 expects the candidate to distinguish the fund’s underlying value from the price the customer actually pays.