- Davidson discussed foreign closed-end funds and exchange-traded funds (ETFs) with Musch. Which of the following are least likely correct statements regarding these investments: A) portfolio managers do not have to worry about redemptions for shares of an international closed-end fund. B) the market value of closed-end country funds have historically had very low correlations with the U.S. stock markets. C) exchange-traded funds achieve international diversification with high levels of liquidity at a minimal cost. D) open-end shares trade at their net asset value with no discounts or premiums. 2. Which of the following statements regarding disadvantages of international open-end funds is least accurate? A) Open-end funds cannot be sold short or margined. B) Due to international markets closing before the U.S. markets close, open-end fund investors must redeem their shares by noon EST causing a time lag and potential cash flow problems for fund managers between market closings. C) Settlement for redeemed shares occurs once the NAV for the fund is determined at the close of the domestic market exchange and since international markets close before the U.S. markets close this causes potential cash flow problems for fund managers between market closings. D) Since open end funds trade at net asset value (NAV) no arbitrage opportunities exist.
Those are least likely maratikus? Edit: I am dead on this exam. :-/
- Correlations is usually high = B 2) For second one it should be D (made wrong choice becuase of formatting Typo for 2 ) C
B) They have high corelation with US market D)
Not dead yet mwvt, you got it with moregood. 1. Your answer: B was correct! Closed-end country funds have historically had periods where their returns are highly correlated with the U.S. stock market, and this reduces the benefits of international diversification with these funds. 2. Your answer: C was incorrect. The correct answer was D) Since open end funds trade at net asset value (NAV) no arbitrage opportunities exist. Since open-end funds trade at NAV this is an advantage because it reduces the uncertainty and risk of holding the securities. Closed end funds trade at a discount or premium which causes uncertainty and risk of holding the securities. All the other choices are correct regarding disadvantages of open-end funds. T/G
good job, mwvt! I’m the one who needs to spend more time reviewing that section …
I just always assume you are right. It is usually a pretty safe bet.