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SIE: Investment Companies & Packaged Products
SIE practice questionmediumClosed-end Funds - Trading

If a closed-end fund is trading below its NAV, this means:

  1. AIt is in violation of SEC rules
  2. BIt is being redeemed by the sponsor
  3. CIt is closed for new investments
  4. DIts market price is less than the underlying portfolio value per share✓ Correct answer
Explanation

Why DIts market price is less than the underlying portfolio value per share

Closed-end funds can trade at a premium or discount to NAV. B, C, and D do not describe this common market phenomenon.

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