- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 1. Market Organization and Structure
- Subject 3. Financial Intermediaries
CFA Practice Question
Which of the following is the LEAST ACCURATE with respect to exchange-traded funds (ETFs)?
B. It is very common for ETF prices to deviate away from their respective net asset value per share.
C. ETFs are essentially shares representing ownership in a portfolio.
D. Unlike traditional open-ended mutual funds, ETFs do not require any accounting at the shareholder level.
A. The in-kind redemption feature of an ETF implies that when an investor sells her shares, a potential tax liability will not arise for the remaining shareholders.
B. It is very common for ETF prices to deviate away from their respective net asset value per share.
C. ETFs are essentially shares representing ownership in a portfolio.
D. Unlike traditional open-ended mutual funds, ETFs do not require any accounting at the shareholder level.
Correct Answer: B
It is very uncommon for ETF prices to deviate away from their respective net asset value per share. There are specialists who make a market in these securities. However, in doing so, they ensure that the ETF price is very close to that of its underlying portfolio.
User Contributed Comments 2
| User | Comment |
|---|---|
| tichas | Study on ETF,S in depth |
| khalifa92 | textbook "known as authorized participants (APs), has the option of trading directly with the ETF. if the market price of an equity ETF is sufficiently below its net asset value, APs will buy shares in the secondary market at the market price and redeem shares at net asset value with the fund." |