IFIC Mutual Funds Licensing Practice Exam · Question
Which of the following is true regarding closed-end mutual funds compared to open-end mutual funds?
Closed-end funds issue a fixed number of shares that trade on a stock exchange. Their market price is determined by supply and demand and can trade at a premium
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Question: Which of the following is true regarding closed-end mutual funds compared to open-end mutual funds?
Answer options: ✅ Closed-end funds trade on stock exchanges, and their market price can differ from their Net Asset Value (NAV).
- Closed-end funds are continuously offered and redeemed by the fund company at their NAV.
- Closed-end funds always have lower MERs than open-end funds.
- Closed-end funds are typically used for daily trading due to high liquidity.
Correct answer: Closed-end funds trade on stock exchanges, and their market price can differ from their Net Asset Value (NAV).
Explanation: Closed-end funds issue a fixed number of shares that trade on a stock exchange. Their market price is determined by supply and demand and can trade at a premium or discount to their underlying NAV, unlike open-end funds which transact at NAV.
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