SIE practice questionmediumClosed-End Funds
What happens if a closed-end investment company wants to raise more capital after its initial public offering (IPO)?
- AIt automatically converts into an open-end fund
- BIt can redeem existing shares at NAV
- CIt increases the NAV of current shares
- DIt may issue additional shares in a secondary offering✓ Correct answer
Explanation
Why D — It may issue additional shares in a secondary offering
After its IPO, a closed-end fund may raise additional capital through a secondary offering. It does not redeem existing shares at NAV or automatically convert to an open-end fund.
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