SIE Exam Question 589: Answer and Explanation

Question: 589

Which of the following is/are correct regarding the capital structure of open-end mutual funds?

(1) Open-end mutual funds issue new shares and redeem existing shares from shareholders.

(2) The price an investor pays when buying shares of an open-end mutual fund is based on supply and demand.

• A. (1) only
• B. (2) only
• C. Both (1) and (2) are correct.
• D. Neither (1) or (2) are correct.

Correct Answer: A

Explanation:

Open-end mutual funds issue new shares and redeem existing shares from shareholders. The price an investor pays when buying shares of an open-end mutual fund is based on the fund's net asset value (NAV).