Question #17
Reading: Reading 35 Exchange-Traded Funds - Mechanics and Applications
PDF File: Reading 35 Exchange-Traded Funds - Mechanics and Applications.pdf
Page: 5
Status: Incorrect
Correct Answer: A
Your Answer: A
Question
An ETF is least likely to trade at a premium/discount to its NAV when:
Answer Choices:
A. the ETF is infrequently traded
B. the underlying securities are exchange-traded
Explanation
Premiums or discounts on ETFs are most commonly caused by timing differences, ETFs on
OTC bonds where no true closing price is available and when ETFs are traded infrequently
(stale pricing).