All Courses > ETFs > 100
ETFs 101: Introduction to Exchange-Traded Funds

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Which statement is false about exchange-traded funds?
Choose wisely. There is only one correct answer.
ETFs are always the cheaper choice for all investors. Although the annual expenses of ETFs are below those of mutual funds, you must pay a commission each time you buy an ETF. As a result, ETFs may not be cheaper choices for investors who invest a little bit at a time, or those who trade actively.
2.
Exchange-traded funds charge commissions.
Choose wisely. There is only one correct answer.
True. Unlike their competitors the no-load index funds, ETFs do charge commissions.
3.
Exchange-traded funds typically are _______.
Choose wisely. There is only one correct answer.
Passively managed, or indexed. For the arbitrage mechanism to work, potential arbitragers must have full, timely knowledge of the ETF's holdings. Active managers rarely disclose this information more than twice per year, though, which is why indexing has been the strategy of choice for ETFs thus far.
4.
The price of an exchange-traded fund on the market is _______.
Choose wisely. There is only one correct answer.
Either the net asset value or a price higher or lower than that. Exchange-traded funds do not necessarily trade at the net asset values of their underlying holdings; they are sometimes higher or lower, based on demand and other factors.
5.
Compared to mutual funds, exchange-traded funds are ______ to make capital-gains distributions.
Choose wisely. There is only one correct answer.
Less likely. However, at times they must, in order to adjust for changes to their underlying indexes.