Regarding investment companies

Question

Quizplus · Accepted Answer

Open-end funds are able to issue additional shares when there is high demand for the fund's investments, and can eliminate shares when they are redeemed as investors sell their shares back to the fund. This feature makes open-end funds more flexible than closed-end funds, which have a fixed number of shares and do not issue or redeem shares based on investor demand.

Answer: B
 Open-end funds can have shares that trade at a premium above their net asset value (NAV) when demand for the shares exceeds supply. When this occurs, the fund's management may create new shares of the fund to meet the demand, which can drive up the price of existing shares. Conversely, if demand for the shares drops, the fund's management may redeem some of the outstanding shares to maintain the NAV. Closed-end funds, on the other hand, typically trade at a discount or premium to their NAV based on market demand for the shares, as there is no mechanism to create or redeem shares.

Answer: A and D are false. 
 Closed-end funds do not typically trade at net asset value (NAV), as their share prices are based on market demand and can trade at a discount or premium to NAV. Open-end funds, on the other hand, are priced at NAV and do not trade on organized exchanges like stocks; their shares are bought and sold directly with the fund company.

Regarding Investment Companies