Chapter 12-Closed End Funds

Question 1

Intraday trading allows investors to buy/sell __ shares like shares of other publicly traded companies.
When shares trade below the ___, investors can enhance returns.
Historically, CEFs have traded at a ___ to their NAV.

Answer 1

CEF
CEF’s NAV
4% discount

Question 2

The history of close-end funds began in ___ more than 30 years before the 1st ___ United States.

Answer 2

1893; mutual fund was formed in

Question 3

CEF advantages include
1) CEF managers can use a ___ strategy because they don’t have to worry about having enough ___ for investors who suddenly redeem shares.
2) A ___ strategy also makes the CEF structure advantageous for less liquid ___, __ capital opportunities, ____, and private ___.
3) CEF managers are never forced to sell in a ___ or overwhelmed they must invest at higher prices in a ___.
4) CEFs can be bought ___ and ____ can be specified. Neither are possible with mutual funds.
5) You pay 1 commission to buy CEF shares and 1 commission to ____. There are no ___ commissions or ___ fees. There is no ____ amounts like for mutual funds.
6) Through ___, you can control the exact price you want to pay for a CEF while you cannot do this with a mutual fund.

Answer 3

1) long-term; liquidity
2) long-term; securities or markets; venture; real estate; placement
3) declining market; bull market
4) throughout the trading day; limit prices
5) sell them; trail; 12b-1; minimum transaction
6) limit orders

Question 4

___ funds account for 2/3 of capital in CEFs.

Answer 4

bond

Question 5

Usually, CEFs trade at a ____

Answer 5

4% NAV discount.

Question 6

A CEF can be worthwhile if shares are bought at a meaningful ___ and those shares are held until the fund changes from a CEF to ____

Answer 6

discount; open-end fund, or the CEF wants to liquidate all shares.

Question 7

Four types of investment companies are _____, _____, ____, and ____

Answer 7

close-end, open-end, ETF & UIT