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1.
The portfolio value of a closed-end fund share is measured by its market price.
False. The portfolio value of a closed-end fund share is measured by its net asset value. Market price reflects what you have to pay to purchase a share of a closed-end fund (plus or minus a brokerage commission).
2.
Giving existing shareholders the right to invest more capital into a closed-end fund in proportion to their existing ownership is called _______.
A rights offering. Rights offerings let current shareholders buy additional stock.
3.
Closed-end funds tend to have higher commissions than regular mutual funds.
True. This is because the shares are fixed and can be bought only through the secondary market, unless they are new issues.
4.
Using your securities as collateral to buy more shares is called _______.
Leveraging. You must put up your own securities as protection for the leveraging.
5.
Which of the following is true of a closed-end fund but not of an open-ended mutual fund?
Stable cash flow. Unlike mutual funds, no assets are flowing into or out of a closed-end fund.
6.
Exchange-traded funds are a low-cost way to _______.
Trade the market. This is one of their popular features.
7.
Which type of mutual fund invests in securities from developing nations?
Emerging markets fund. Emerging markets funds invest in securities from developing nations.
