SIE practice questionhardClosed-End Funds
After a closed-end fund’s IPO, what is the primary source of liquidity for investors?
- ARedeeming shares with the fund at NAV
- BTrading the shares on a secondary market exchange✓ Correct answer
- CDirect sale to the fund’s manager
- DMandatory repurchase by the distributor
Explanation
Why B — Trading the shares on a secondary market exchange
After a closed-end fund's IPO, investors typically obtain liquidity by selling shares on a secondary market exchange. Open-end mutual funds, not closed-end funds, redeem shares directly at NAV.
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