Multiple choice

Which of the following is/are true in a closed ended MF?

  1. Shares are not normally redeemable for cash or securities until the fund liquidates.

  2. Shares are redeemable for cash or securities before the fund liquidates.

  3. Typically an investor can acquire shares in a closed-end fund by buying shares on a secondary market from a broker, market maker, or other investor.

  4. Only (1) and (c)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In a closed-end mutual fund, the fund issues a fixed number of shares which are then traded on a secondary market like a stock exchange. Unlike open-end funds, shares are not redeemable for cash by the fund itself until a specific liquidation date. Investors must buy or sell shares through a broker on the market.

Keep practicing — related questions