Definition
Public Offering Price
The Public Offering Price (POP) is the price at which a mutual fund sells its shares to investors. For a load fund, POP equals Net Asset Value (NAV) plus the sales charge; for a no-load fund, POP equals NAV. The formula is POP = NAV / (1 - sales charge percentage).
A Class A mutual fund has a NAV of $19.00 per share and a 5% sales charge. POP = $19.00 / (1 - 0.05) = $19.00 / 0.95 = $20.00. The investor pays $20.00 per share, of which $1.00 (5% of POP) is the sales charge and $19.00 is invested at NAV. An investor redeeming the same share would receive $19.00 (NAV), not $20.00 (POP).
The sales charge percentage is calculated as a percentage of POP, not NAV. Students often compute POP as NAV multiplied by (1 + sales charge), which is wrong. Using the $19 NAV and 5% example: NAV times 1.05 is $19.95, not $20.00. The correct formula divides NAV by (1 minus the load) so that the sales charge equals exactly 5% of the final POP. Another common error is forgetting that investors buy at POP but redeem at NAV.
How is Public Offering Price tested on the exam?
- Calculating POP given NAV and the sales charge percentage
- Calculating the sales charge percentage given NAV and POP
- Solving for the dollar amount of the sales charge given NAV and POP
- Recognizing that the sales charge is computed as a percentage of POP, not NAV
- Applying forward pricing: orders are filled at the next NAV calculated after the order is received
Regulatory limits
Regulatory Limits
| Description | Limit | Notes |
|---|---|---|
| Sales charge computation basis | Percentage of POP, not NAV | A "5% load" means 5% of the final POP. POP = NAV / (1 - sales charge %), not NAV times (1 + sales charge %). |
| Forward pricing (Rule 22c-1) | Orders priced at the next computed NAV after the order is received | NAV and POP are calculated at least once per business day, typically after the 4:00 p.m. ET market close. Orders received before the cutoff are filled at that day’s NAV; orders received after the cutoff are filled at the next business day’s NAV. |
| Maximum front-end load eligible for breakpoints | 8.5% of POP | FINRA Rule 2341 sets the 8.5% ceiling. To charge the full 8.5%, the fund must offer breakpoints, rights of accumulation, and a reinvestment privilege. |
POP = NAV divided by (1 minus the load). The sales charge sits on top of NAV, but it is measured as a slice of POP, not NAV. Buy at POP, redeem at NAV. And remember forward pricing: your order rides the next computed NAV, not the one already on the board.
Practice questions
Test your understanding with the questions below. Pick an answer to reveal the explanation.
A Class A mutual fund has a Net Asset Value (NAV) of $14.25 per share and a Public Offering Price (POP) of $15.00 per share. What is the sales charge in dollars per share, and what percentage of POP does it represent?
A is correct. The sales charge per share is POP minus NAV: $15.00 - $14.25 = $0.75. The sales charge percentage is computed against POP, not NAV: $0.75 / $15.00 = 0.05, or 5.00%.
B ($0.75 at 5.26%) makes the classic mistake of dividing the sales charge by NAV ($0.75 / $14.25 = 5.26%) instead of POP. The Series 6 exam treats this as a trap answer. C uses the wrong dollar charge and the wrong base. D applies a math error to the correct dollar figure.
POP calculations are a Series 6 staple. The exam expects you to know two things on sight: that the sales charge equals POP minus NAV, and that the sales charge percentage is computed on POP. Choosing the percentage-of-NAV answer is the easiest way to lose this question.
An investor places a market order to purchase shares of a mutual fund at 11:00 a.m. ET on a Tuesday. The fund computes NAV daily at 4:00 p.m. ET. At what price will the investor’s order be executed?
B is correct. Under forward pricing (Rule 22c-1), mutual fund orders are filled at the next NAV (and therefore POP) computed after the order is received. An 11:00 a.m. ET Tuesday order is received before the 4:00 p.m. ET pricing time, so it is filled at Tuesday’s 4:00 p.m. ET POP.
A is incorrect because Monday’s closing price has already been set and is not used for orders received the next day. C is incorrect because investors purchase shares at POP, not at NAV. NAV applies on redemption (or in a no-load fund). D is not how mutual fund pricing works; mutual funds do not blend prices across days.
The Series 6 exam tests forward pricing and the buy-at-POP-redeem-at-NAV mechanic. Confusing forward pricing with intraday execution (the way listed securities trade) is a common error, especially for candidates with prior equities exposure.
What concepts relate to Public Offering Price?
This term is part of these clusters :
Where does Public Offering Price appear on the Series 65 exam?
This term is tested in the following Series 65 exam topics:
Where does Public Offering Price appear on the Series 6 exam?
This term is tested in the following FINRA Series 6 topic areas:
Soliciting Business and New Issues
Series 6 questions on prospectus requirements, the new-issue process, exempt securities, Regulation ...
practice questions →Quotes and Best Execution
Practice questions on bid-ask quotes, mutual fund forward pricing, best execution for fund purchases...
practice questions →Who uses Public Offering Price on the Series 6?
This term is part of the day-to-day workflow for these Series 6 audiences: