SIE practice questionmediumETFs
An investor notices that an ETF is trading at a price slightly higher than its net asset value (NAV). What does this indicate?
- AThe ETF is trading at a premium✓ Correct answer
- BThe ETF is trading at a discount
- CThe ETF is necessarily overpriced
- DThere is a market error that must be corrected immediately
Explanation
Why A — The ETF is trading at a premium
A is correct; when the market price exceeds NAV, the ETF trades at a premium. B is the opposite—trading below NAV. C is incorrect since a premium does not always mean overpricing. D is wrong—premiums and discounts are normal in ETFs.
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