Products & Their RisksQuestion 61 of 398
Which feature is characteristic of an open-end investment company (mutual fund)?
a.It trades on an exchange at a price set by supply and demand
b.It issues a fixed number of shares in a one-time offering
c.It continuously issues new shares and redeems them at net asset value
d.It holds a fixed, unmanaged portfolio until a set termination date
Explanation
An open-end fund continuously offers new shares to the public and stands ready to redeem outstanding shares at their net asset value. Because purchases and redemptions occur at NAV rather than on an exchange, the number of shares outstanding constantly changes. This structure is defined under the Investment Company Act of 1940.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
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