A closed-end fund with a NAV of $18.00 per share is trading on the NYSE at $15.75. An investor who purchases shares in the secondary market pays:

A closed-end fund with a NAV of $18.00 per

Multiple choice — select the best answer

A$15.75 plus a front-end sales load set by the fund's prospectus
B$18.00 plus a sales load equal to the premium over the market price
C$18.00, because closed-end fund shares must be purchased at NAV
D$15.75, representing a 12.5% discount to NAV

✓ Correct answer: D. $15.75, representing a 12.5% discount to NAV Closed-end fund shares trade on exchanges at market-determined prices that can be above (premium) or below (discount) NAV; in this case $15.75 is approximately 12.5% below the $18.00 NAV, and no additional sales load is charged for secondary-market purchases.

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Topic: Series 6 (Investment Products)

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A closed-end fund with a NAV of $18.00 per share is trading on the NYSE at $15.75. An investor who purchases shares in the secondary market pays:

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