If a closed end fund price can below, above or at NAV price; why couldn’t the answer be NAV = 33.67/ POP = 36.10? Is it because it’s too far from NAV? Thank You
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Hi @t0915, good question.
It asks which choice must be for a closed-end fund. The choice you mentioned could also be for an open-end fund.
[HFVYG] Which of the following price sets must be for a closed-end fund?
Closed-end funds maintain a NAV ($33.67 in this question), but the NAV only serves as a guide for how much the shares are worth. These securities trade in the market and are subject to price changes based on supply and demand. Therefore, the purchase price of a closed-end fund can be any price, i.e. above, below, or exactly at the NAV.
Open-end funds are not publicly traded in the market, instead, they are transacted between the investor and the fund company. The fund can be purchased at the NAV if there is no sales charge, or above the NAV if there is a sales charge. They will never have a purchase price that is less than the NAV.
So, if a fund has a purchase price that is lower than the NAV, you can infer that it must be a closed-end fund.
Please let me know if I can clarify further!