SIE practice questionhardClosed-end Funds - Pricing
A closed-end fund trades at a discount to its NAV. Which factor is least likely to explain this discount?
- AThe fund invests in illiquid or unpopular securities
- BThe fund has consistently strong past performance✓ Correct answer
- CInvestor demand for the fund is low
- DThe fund's management fee is considered excessive
Explanation
Why B — The fund has consistently strong past performance
Strong performance typically boosts demand, narrowing discounts. Illiquid assets, low demand, and high fees can drive discounts, making B the least likely explanation.
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