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1.
Exchange-traded notes are similar to traditional exchange-traded funds. Therefore, they are funds.
False. They are essentially bonds, not funds. They do not hold a fundful of securities.
2.
A large premium on an existing exchange-traded note might do what if new shares of the note are issued?
Fall. Large premiums can quickly collapse upon the issuance of new shares of an exchange-traded note.
3.
An investor in exchange-traded notes can look forward to the kinds of regulatory protections that exchange-traded funds and open-end mutual funds enjoy.
False. ETNs are not governed under the same regulatory structure as those other investments.
4.
Distributions from exchange-traded notes are taxed at _______.
Ordinary income rates. Distributions, though rare, are taxed at ordinary income rates.
5.
A sizable premium or discount on an exchange-traded note could be a red flag. Why?
Either of the above. Either of these situations could lead to big premiums or discounts on an exchange-traded note.