Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Question
Chapter 4, Problem 3PS
Summary Introduction
To determine:
The reason behind the requirement of keeping cash or cash equivalent securities in case of open end funds, but not in the case of closed end funds.
Introduction:
Open end funds are offered by the fund company directly to investors. The quantity of shares is fixed in case of open end funds. Closed end funds on the other hand, are generally sold in the secondary market and they are not redeemed by the fund manager. Due to such an arrangement the trading of shares might take place at a discount or substantial premium with respect to its NAV.
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