SIE practice questionmediumInvestment Companies - Closed-End vs Open-End
Which statement best distinguishes a closed-end fund from an open-end mutual fund?
- AClosed-end fund shares trade on exchanges; mutual fund shares are redeemed by the fund.✓ Correct answer
- BMutual funds have a fixed number of shares outstanding.
- CClosed-end funds are guaranteed by the government.
- DClosed-end funds cannot invest in stocks.
Explanation
Why A — Closed-end fund shares trade on exchanges; mutual fund shares are redeemed by the fund.
Closed-end funds trade on exchanges among investors, while mutual funds redeem shares at NAV. Mutual funds issue/redeem shares; closed-end funds are not guaranteed and can invest in stocks.
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