Question

A secuity has the following characteristics: fixed number of shares outstanding; trades continuously during the market open; represents ownership of underlying asset or portfolio of securities; market price could deviate from the NAV or Net Asset Value per share at end of day. This security is a:

A. A clsoed end fund
B. An ETF
C. An open end mutual fund
D. An ETN

Answer 1

The security in question is a closed-end fund, which has a fixed number of shares that trade on the stock exchange during market hours, and its market price can deviate from the NAV.

Step-by-step explanation:

The security described in the question is an open-end mutual fund. The security described fits the characteristics of a closed-end fund. A closed-end fund has a fixed number of shares that are traded on the stock market during market hours. Unlike open-end funds, which allow investors to buy and sell shares at their net asset value (NAV) at the end of the day, closed-end funds can trade at market prices that may be above or below their NAV.

Exchange-Traded Funds (ETFs) also trade throughout the day and can have their market price deviate from the NAV. However, they usually offer creation and redemption of shares to authorized participants which can help keep the market price close to the NAV. An Exchange-Traded Note (ETN) is a debt security with the performance tied to a market index or other benchmark, and while it also trades on the exchange, it does not represent ownership in a portfolio of securities like a closed-end fund.