SIE practice questionhardClosed-end Funds - Premiums
A closed-end fund may trade at a premium if:
- AThe underlying portfolio is illiquid
- BIt is required to redeem shares at NAV
- CInvestor demand for the fund is high relative to its NAV✓ Correct answer
- DIt is only available to accredited investors
Explanation
Why C — Investor demand for the fund is high relative to its NAV
High demand can push price above NAV (premium). Closed-end funds do not redeem at NAV (B); illiquidity (C) or accredited status (D) are not likely causes for premiums.
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