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Q2B.

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Essentials Of Investments
Found in: Page 104
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

Short Answer

Why can closed-end funds sell at prices that differ from net value while open-end funds do not?

Close-end funds trade on the open market and are thus subject to market pricing. So, they can be sold at a price that is different from net value.

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Step by Step Solution

Definition

The open-end and closed-end are two types of managed funds that manage investment for a fee

Explanation on closed-end funds and open-end funds

The reason why close-end funds sell at prices that differ from their net value is because they trade on the open market and are thus subject to fluctuations in their price according to the fluctuations in the market. On the other hand, open end funds, are sold by the mutual fund and must reflect the NAV of the investments.

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