Exam Series 6 topic 1 question 107 discussion

Question: 2. Understanding the difference between open-end and closed-end funds Categorizing Mutual Funds For each of the following statements regarding mutual funds, indicate whether it is true of open-end, closed-end, or both open- and closed-end funds. Open-End Funds Closed-End Fund Investors normally buy and sell shares in this fund directly from or to the fund

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To determine which type of mutual fund the first statement refers to, identify if the fund is one where investors can directly buy and sell shares from the fund at the fund’s net asset value (NAV).

Statement 1: Investors normally buy and sell shares in this fund directly from or to the fund itself.

Exam Series 6 topic 1 question 107 discussion

Suggested Answer: B ️
A difference between closed-end and open-end investment companies is that open-end investment company shares will never be offered at a price below the net asset value of the fund; this is not true of closed-end companies. The shares of open-end investment companies (mutual funds) are bought (and sold) through the company itself at net asset value or net asset value plus a load charge.
Therefore, the offer price will always be greater than or equal to the funds net asset value per share.
Closed-end company shares are bought and sold on exchange floors, and the price is set by supply and demand, so closed-end shares may sell for less than the net asset value of the fund. Closed-end companies have a fixed number of shares. Open-end companies can create new shares if there are more buyers than sellers. Both types of management companies can be either diversified or non-diversified in their holdings.

by lolojepu at April 6, 2025, 1:17 a.m.

https://www.chegg.com/homework-help/questions-and-answers/2-understanding-difference-open-end-closed-end-funds-categorizing-mutual-funds-following-s-q34923904https://www.examtopics.com/discussions/finra/view/296842-exam-series-6-topic-1-question-107-discussion/

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