Maria is considering investing in a closed-end fund. Which of the following is a key characteristic of closed-end funds that differentiates them from open-end mutual funds?

Question: Maria is considering investing in a closed-end fund. Which of the following is a key characteristic of closed-end funds that differentiates them from open-end mutual funds?

Answer options:

• Units are continuously issued and redeemed by the fund at Net Asset Value (NAV). ✅ They typically have a fixed number of shares outstanding that trade on stock exchanges.
• Their market price is always equal to their Net Asset Value Per Share (NAVPS).
• Investors can only purchase units directly from the fund company at original issue.

Correct answer: They typically have a fixed number of shares outstanding that trade on stock exchanges.

Explanation: Closed-end funds issue a fixed number of shares through an initial public offering (IPO), and these shares then trade on stock exchanges, rather than being continuously issued or redeemed by the fund company.