Question

Which of the following statements correctly describe similarities between exchange-traded funds and closed-end investment companies?

Options:
A) There are a limited number of outstanding shares.
B) They are traded on registered stock exchanges.
C) They trade at prices that are not dependent upon but close to their net asset value.
D) Investors pay commissions to purchase and liquidate their positions.

Answer 1

Exchange-traded funds (ETFs) and closed-end investment companies share similarities such as a limited number of outstanding shares, being traded on registered stock exchanges, trading at prices close to their net asset value, and investors paying commissions for buying and selling shares.

Step-by-step explanation:

Exchange-traded funds (ETFs) and closed-end investment companies have several similarities:

1. There are a limited number of outstanding shares. Both ETFs and closed-end investment companies have a fixed number of shares available for trading.
2. They are traded on registered stock exchanges. Both ETFs and closed-end investment companies are listed and traded on stock exchanges, providing investors with easy access to buy and sell shares.
3. They trade at prices that are not dependent upon but close to their net asset value. Both ETFs and closed-end investment companies have market prices that may vary from their net asset value (NAV), but generally trade close to the underlying value of their assets.
4. Investors pay commissions to purchase and liquidate their positions. Investors typically incur brokerage commissions when buying or selling shares of ETFs and closed-end investment companies.