| LOS c: Explain the advantages and risks of ETFs.
Q1. Which statement about the advantages and disadvantages of exchange-traded funds (ETFs) is least accurate?
A) ETFs represent an attractive diversification tool, but investors cannot check their composition daily.
B) Most ETFs have low fees, but some may cost more to trade because of high bid/ask spreads.
C) ETFs offer less capital-gains tax liability than open-end funds.
Q2. Which of the following is least likely an advantage of exchange traded funds (ETFs) over traditional mutual funds?
A) The structure of ETFs prevents share prices from trading at a significant premium/discount to net asset value (NAV).
B) ETF shares have smaller bid-ask spreads than open-end mutual funds.
C) ETF shares trade throughout the day at continuously updated prices, while open-end funds trade only once a day at close-of-market prices.
Q3. Which of the following risks are specific to exchange traded funds (ETFs) that are allowed to purchase derivatives?
A) Tracking error risk.
B) Market risk.
C) Credit risk.
Q4. A primary advantage of the in-kind redemption process of exchange traded funds (ETFs) is that it:
A) provides greater liquidity for shares of the ETF.
B) reduces transaction costs for the investor.
C) reduces tax liability. | 
发表于 2009-2-28 15:05
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