All Courses > ETFs > 100
ETFs 101: 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.
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.
3.
Exchange-traded funds are a type of mutual fund.
Choose wisely. There is only one correct answer.
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.
4.
When can you buy exchange-traded funds?
Choose wisely. There is only one correct answer.
Anytime during the trading day. As opposed to mutual funds, which are sold at the end of the day no matter when during the day you place your order, you can buy exchange-traded funds at any time during the day.
5.
Which statement is true about exchange-traded funds (ETFs)?
Choose wisely. There is only one correct answer.
The arbitrage mechanism that keeps ETFs' prices in line with their NAVs should work most of the time. Differences between an ETF's price and its NAV can occur with those ETFs that aren't traded very often. Also, it's unclear how well the arbitrage mechanism will work during a full-fledged market correction.