Which of the following investment products is most likely to trade at their NAV per share?
B. Open-end mutual funds
C. Close-end mutual funds
The correct answer is B.
The CFAI Equity Section states that ETF is traded like a closed-end fund, but NAV is not discounted (which is close to the underlying asset). Thus, we can cross out C.
However, I am really confused with the answer since the CFAI book states “In practice, the market price of the ETF is likely to be close to the NAV of the underlying investment”. Thus, can someone explain why the correct answer is not A? Given the fact that ETF is more transparent than both open and closed-end funds (since ETF’s NAV is updated daily).