Question

Which of the following is true of closed end funds but not of open end funds?

A) Pay dividends when declared by the board of directors
B) Can sell shares of common stock
C) Can invest in a variety of securities
D) Have a fixed number of shares

Answer 1

The correct answer is A) Pay dividends when declared by the board of directors. Closed-end funds pay dividends when declared by the board of directors, unlike open-end funds.

Step-by-step explanation:

The correct answer is A) Pay dividends when declared by the board of directors. Closed-end funds are a type of investment fund that issues a fixed number of shares through an initial public offering, and these shares are then traded on a stock exchange. Unlike open-end funds, closed-end funds do not continuously issue new shares or redeem existing shares. Therefore, when dividends are declared by the board of directors of a closed-end fund, they are paid to the shareholders. On the other hand, open-end funds continuously issue and redeem shares based on investor demand and do not pay dividends when declared by the board of directors.