Products & Their RisksQuestion 71 of 398
Which of the following is generally TRUE of an exchange-traded fund (ETF)?
a.It can only be bought or sold once per day at the closing NAV
b.It is always actively managed to beat a benchmark
c.It is prohibited from being sold short or bought on margin
d.It trades throughout the day on an exchange at market-determined prices
Explanation
ETFs trade intraday on an exchange like a stock, so investors can buy or sell at market prices at any time during the trading session, and shares may be bought on margin or sold short. Many ETFs track an index passively, though some are actively managed. This intraday tradability distinguishes ETFs from open-end mutual funds.
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