Chapter 1: Q2B. (page 104)
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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Now visit the website of the NASD, www.finra.org. What is its mission? What information and advice does it offer to beginners?
Open-end equity mutual funds find it necessary to keep a significant percentage of total investments, typically around 5% of the portfolio, in very liquid money market assets.
Closed-end funds do not have to maintain such a position in “cash-equivalent” securities. What difference between open-end and closed-end funds might account for their differing policies?
An investor is in a 30% combined federal plus state tax bracket. If corporate bonds offer 9% yields, what must municipals offer for the investor to prefer them to corporate bonds?
How do security dealers earn their profits?
Why do financial assets show up as a component of household wealth, but not of national wealth? Why do financial assets still matter for the material well-being of an economy?
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