Alternative Investments【Reading 66】Sample investment, 2012, company, assets

kim226

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

A) discount.

B) net asset value.

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.

kim226

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.

kim226

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.

kim226

An investment company that stands ready to redeem investor shares at market value is classified as:

A) an open-end investment company.

B) a closed-end investment company.

C) a managed investment company.

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A closed-end investment company does not redeem investor shares; after issuance, shares trade in the secondary market. Some managed investment companies may redeem shares, but others may not. An open-end investment company always offers a redemption feature.