In the event of financial distress,open-ended mutual fund investors
A)have an incentive to cash in their shares quickly since they are paid on a first come,first served basis.
B)have an incentive to avoid a run since that will deplete the fund net asset value.
C)have an incentive to cash in their shares quickly since that will increase the fund's net asset value.
D)will switch into low risk bank deposits.

Question

Quizplus · Accepted Answer

Open-ended mutual funds operate on a first come, first served basis where investors can redeem their shares at any time. However, if there is a rush for investors to redeem their shares, it can lead to a depletion of the fund's assets and reduce the net asset value (NAV) of the fund. Therefore, investors have an incentive to avoid a run and not cash in their shares quickly in the event of financial distress.

In the Event of Financial Distress,open-Ended Mutual Fund Investors