Which of the following statements best describes a key difference between an open-end mutual fund and a closed-end fund?

Question: Which of the following statements best describes a key difference between an open-end mutual fund and a closed-end fund?

Answer options: ✅ Open-end fund shares are bought and sold directly with the fund company, while closed-end fund shares trade on an exchange.

• Closed-end funds are always actively managed, whereas open-end funds can only be passively managed.
• Open-end funds can issue an unlimited number of shares, while closed-end funds have a fixed number of shares outstanding.
• Closed-end funds are subject to more stringent regulatory oversight than open-end funds.

Correct answer: Open-end fund shares are bought and sold directly with the fund company, while closed-end fund shares trade on an exchange.

Explanation: Open-end mutual fund units are continuously issued and redeemed by the fund company at Net Asset Value (NAV). In contrast, closed-end funds issue a fixed number of shares that then trade between investors on a stock exchange.