Products & Their RisksQuestion 70 of 398
Which statement correctly distinguishes a closed-end fund from an open-end fund?
a.Both continuously issue and redeem shares at NAV
b.An open-end fund trades on an exchange while a closed-end fund does not
c.A closed-end fund has a fixed number of shares that trade in the secondary market, while an open-end fund issues and redeems shares at NAV
d.Only closed-end funds may use leverage or borrow
Explanation
The key structural difference is capitalization: a closed-end fund raises capital once through a fixed share offering, and those shares then trade in the secondary market at market prices. An open-end fund has a variable number of shares that it continuously issues and redeems at net asset value.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
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