Question7 Which of the following statements about open-end and closed-end funds is NOT true? Open-end funds redeem at NAV. Open-end funds can grow by issuing new units. Closed-end funds trade continuously on exchanges. Closed-end funds have set termination dates. Closed end funds redeem at market price. ResetMaximum marks: 3 Flag question undefined

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BlackTom AI · Accepted Answer

Question: Which of the following statements about open-end and closed-end funds is NOT true?
Options:
- Open-end funds redeem at NAV.
- Open-end funds can grow by issuing new units.
- Closed-end funds trade continuously on exchanges.
- Closed-end funds have set termination dates.
- Closed end funds redeem at market price.

Option 1: Open-end funds redeem at NAV.
This statement is true. Open-end funds redeem shares at their net asset value (NAV) per share, which is a core feature of open-end funds, ensuring investors can exit at a price that reflects the fund’s underlying assets.

Option 2: Open-end funds can grow by issuing new units.
This statement is also true. Open-end funds raise assets by issuing new shares when investors buy, allowing the fund to grow its asset base and liquidity directly from ongoing investor demand.

Option 3: Closed-end funds trade continuously on exchanges.
This statement is true. Closed-end funds do not issue or redeem shares on a daily basis; instead, their shares are bought and sold on stock exchanges like common stocks, leading to continuous trading during market hours.

Option 4: Closed-end funds have set termination dates.
This statement is not true in most cases. While some funds may have a planned lifecycle, the standard closed-end fund does not have a predetermined termination date in the way a fixed-mund fund might. Many closed-end funds are perpetual unless a dissolution is initiated, so saying they have set termination dates is typically inaccurate.

Option 5: Closed end funds redeem at market price.
This statement is not true. Closed-end funds generally do not redeem shares at market price through the fund; instead, investors trade shares on an exchange. Redemption by the fund itself (at NAV or market price) is not how most closed-end funds operate, which makes this option incorrect in describing typical closed-end fund mechanics.

In summary, several statements are not true about closed-end funds, but the option that explicitly claims that a closed-end fund redeems at market price is inconsistent with their standard structure. The explanation above contrasts each statement with how open-end and closed-end funds typically function, highlighting why the non-true statements diverge from standard definitions.

类似问题

Mutual funds pool money from investors to purchase portfolios of investments.

A mutual fund is a diversified portfolio of stocks and/or bonds depending on what the manager has purchased.

Two advantages of investing in mutual funds are diversification and professional management.

One of the attractive features of mutual funds is that they offer small investors a diversified portfolio and professional management.

Mutual funds are often considered to be a good way to get started with medium-risk investments.

Which one of the following statements regarding open-end mutual funds is false?

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