SIE practice questionmediumClosed-End Funds
Which of these is true regarding shares of a closed-end investment company?
- AThey are continuously issued and redeemed by the fund at NAV
- BThey are typically bought and sold in the secondary market at market prices✓ Correct answer
- CThey are not regulated under the Investment Company Act of 1940
- DThey can only be sold to accredited investors
Explanation
Why B — They are typically bought and sold in the secondary market at market prices
Closed-end fund shares trade in the secondary market at market prices, sometimes above or below NAV. Mutual funds (not closed-end) continuously issue and redeem at NAV. All investment companies are regulated by the Act. Closed-end funds are available to general investors.
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