Question

When an investor wants to sell shares in an open-end mutual fund, they:

a. Sell them on any organized stock exchange.
b. Must find a buyer and negotiate a price.
c. Sell them back to the mutual fund at the net asset value (NAV).
d. Can only sell them during a specific trading window.

Answer 1

Investors sell shares of an open-end mutual fund back to the mutual fund company at the current NAV, not on the stock exchange or through finding own buyers. The correct answer is option c.

Step-by-step explanation:

When an investor wants to sell shares in an open-end mutual fund, they sell them back to the mutual fund at the net asset value (NAV). This is because open-end funds are not traded on an exchange, but rather directly with the fund company, which stands ready to buy back its shares at their current NAV, usually calculated at the end of the trading day. So, the correct answer to the question is option (c). Investors cannot sell mutual fund shares on stock exchanges, nor do they need to find their own buyers, and there are no specific trading windows for these transactions.