CFA Level I · CFA Level I Exam · Portfolio Management: An Overview
Compared with an open-end mutual fund, an exchange-traded fund (ETF) is most likely to:
An ETF trades on an exchange throughout the day at market prices that may differ slightly from net asset value. Open-end mutual funds instead transact with investors once a day at NAV, so the other two options describe mutual funds.
- Abe priced once per day at net asset value
- Btrade throughout the day at market prices that can differ from net asset valueCorrect
- Cissue and redeem shares directly with all retail investors at net asset value
Explanation
ETF shares trade on an exchange all day at market prices, which can deviate slightly from NAV; arbitrage by authorized participants keeps the gap small. Daily NAV pricing and direct redemption at NAV describe open-end mutual funds.
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