SIE practice questionmediumETF Risks
Which one is a unique risk associated with exchange-traded funds (ETFs) compared to mutual funds?
- AEarly redemption penalties
- BManagerial risk due to active management
- CGuaranteed returns
- DPotential for trading at a price away from NAV✓ Correct answer
Explanation
Why D — Potential for trading at a price away from NAV
Unlike open-end mutual funds, ETFs trade intraday in the secondary market and may trade at a premium or discount to NAV. Returns are not guaranteed, and active management is not unique to ETFs.
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