Open-end and closed-end investment companies differ in their:

Open-end and closed-end investment companies differ in their:

• A. Objectives.
• B. Capitalization.
• C. Techniques of management.
• D. Method of computing net asset value

Answer: (B)

The main idea here is capitalization—the number of shares outstanding. Open-end funds continuously issue and redeem shares to meet investor demand, so the total number of shares changes from day to day. Closed-end funds, after their initial offering, keep a fixed number of shares outstanding and don’t issue new shares or redeem existing ones in response to market activity, so their capitalization stays constant. This difference explains why open-end shares are bought or redeemed at the fund’s net asset value, while closed-end shares trade on an exchange at market prices that can diverge from NAV. Other aspects like investment objectives, management techniques, or how NAV is calculated aren’t what fundamentally separates the two.

The main idea here is capitalization—the number of shares outstanding. Open-end funds continuously issue and redeem shares to meet investor demand, so the total number of shares changes from day to day. Closed-end funds, after their initial offering, keep a fixed number of shares outstanding and don’t issue new shares or redeem existing ones in response to market activity, so their capitalization stays constant. This difference explains why open-end shares are bought or redeemed at the fund’s net asset value, while closed-end shares trade on an exchange at market prices that can diverge from NAV. Other aspects like investment objectives, management techniques, or how NAV is calculated aren’t what fundamentally separates the two.