1215

Both open-end and closed-end funds typically charge:

A) an annual management fee.

B) a front-end load.

C) a premium to the underlying net asset value (NAV).

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Both types of managed funds, open-end and closed-end, typically charge an annual management fee. Open-end funds sometimes charge a front-end load or a redemption fee, but closed-end funds do not. Closed-end funds can sell at a premium (or discount) to underlying NAV, but this does not result in compensation to the fund.

1215

For the equity shares of an open-end investment company, the share value:

A) is determined in the secondary market.

B) always equals NAV.

C) may or may not equal NAV.

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Shares of a closed-end investment company are determined in the secondary market and may or may not equal NAV. Share value of an open-end investment company always equals NAV because the investment company stands ready to redeem shares at their net asset value.

1215

The per-share value of an investment company’s assets minus its liabilities is called the:

A) net asset value.

B) discount.

C) current market value.

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The net asset value (NAV) of an investment company is calculated as assets minus liabilities, stated on a per-share basis.

1215

Which statement about mutual funds is most accurate?

A) The redemption fee for a closed-end fund is the commission charged on the sale and a portion of the bid/ask spread of the shares.

B) The liquidity of an open-end fund is provided by the open market.

C) Some open-end funds charge no fees.

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Since closed-end funds are traded in the secondary market for a price determined by supply and demand for shares, the spread along with the sales commission represent the redemption fee. All funds charge fees, although the fees vary widely from fund to fund. In addition, some funds charge a load in addition to fees. The liquidity of an open-end fund is provided by the company that manages it, not the open market.

1215

Open-end investment companies:

A) must register a maximum number of shares with the Securities and Exchange Commission (SEC).

B) must redeem shares at the net asset value with no fees included.

C) can continue to sell and repurchase shares after their initial public offerings.

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The primary difference between open-end and closed-end funds is that open-end funds continue to sell and repurchase shares after their initial public offerings. Open-end investment companies can be load or no-load.

1215

A closed-end fund:

A) has its price determined by the net asset value (NAV).

B) has its price determined by supply and demand, regardless of its net asset value (NAV).

C) is traded in the primary market but not the secondary market.

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Closed-end investment companies are initiated through a stock offering to raise funds. The investment company does not issue or redeem shares after the initial offering. Shares of a closed-end investment company are traded in public markets and are priced by supply and demand. The share price of a closed-end fund is not directly linked to the fund’s NAV. The NAV is the prevailing market value of all the shares and assets owned by the fund. Many closed-end funds sell at a discount of 5 to 20% from their NAV.

luqian55

thanks a lot