SIE Exam Question 770: Answer and Explanation

Question: 770

Which of the following is/are correct regarding closed-end mutual funds?

(1) Closed-end mutual funds may issue new shares when an individual buys existing shares.

(2) Closed-end mutual funds may sell at a premium or discount to their net asset value.

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

Correct Answer: B

Explanation:

Closed-end mutual funds may sell at a premium or discount to their net asset value. Only open-end mutual funds may issue new shares when an individual buys existing shares.