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In what form do investors buy or redeem shares from an exchange-traded fund?

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In single shares of any number

In blocks of a certain number

Either of the above

None of the above

In blocks of a certain number. The blocks are typically in groups of 50,000 shares.

If you are an active, frequent trader of exchange-traded funds, then your trading expenses will probably _______ those of mutual funds.

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Exceed

Equal

Match

Exceed. Those who trade frequently will probably discover this. So if you plan to trade ETFs frequently, you should take note.

Exchange-traded funds charge commissions.

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True

False

True. Unlike their competitors the no-load index funds, ETFs do charge commissions.

Exchange-traded funds are a type of mutual fund.

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True

False

False. Exchange-traded funds are not mutual funds; they are baskets of securities that are traded on an exchange. They are actually part mutual fund, part stock.

Compared to mutual funds, exchange-traded funds are ______ to make capital-gains distributions.

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More likely

Less likely

Equally likely

Less likely. However, at times they must, in order to adjust for changes to their underlying indexes.

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