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CFA Level 1 Question of the Week - Portfolio Management

Matt_AnalystPrepMatt_AnalystPrep MontrealPosts: 141 Associate
edited September 2017 in Level 1 Questions

Which of the following is/are the most likely similarity(ies) between exchange-traded funds and closed-end funds?

I. Both types of funds are passively managed to match a particular index.

II. In both types of funds, the market price of shares and the net asset value (NAV) can differ significantly.

III. Both types of funds can be sold and purchased on the open market.

CFA Level 1 Question of the Week - Portfolio Management 10 votes

A. III only
70% 7 votes
B. I & III only
10% 1 vote
C. I & II only
20% 2 votes

Comments

  • The correct answer is A.

    ETFs and closed-end funds are sold and purchased in the exchange market rather than from the fund itself. ETFs are passively managed to match the index while closed-end funds are actively managed. In closed-end funds, the market price of shares and the NAV differ significantly, whereas ETFs are designed to keep their share price close to the NAVs.
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