Multiple choice

Some closed-end funds are quoted at a discount to their NAV because

  1. Investors do not expect the current NAV to be sustained in future

  2. The repurchase price fixed by the fund in lower than the NAV

  3. Of the inherent risk involved in investing in such type of funds

  4. Of high expense ratios
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A Correct answer
Explanation

Closed-end funds often trade at discounts to their NAV because of supply and demand factors on the exchange. If investors expect the NAV to decline in the future, they will only buy at a discount. Premiums or discounts are market-determined, not set by the fund.

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