Which one of the following statements regarding open-end mutual funds is false?

Question

BlackTom AI · Accepted Answer

To tackle the question about open-end mutual funds, I will evaluate each statement in turn and explain why it is true or false, using core fund features as the basis.

A. The funds redeem shares at net asset value.
This is a standard characteristic of open-end mutual funds: shares are bought and redeemed at the fund’s net asset value (NAV) per share calculated at the end of the trading day. The statement is consistent with how open-end funds function, so it is considered true.

B. The funds offer investors professional management.
Open-end mutual funds are actively or passively managed by professionals who select the fund’s holdings. This is a defining feature, so this option is true as well.

C. The funds offer investors a guaranteed rate of return.
A guaranteed rate of return implies risk-free or fixed returns, which is not how open-end mutual funds work. Their performance depends on the market and the fund’s holdings, so this statement is false and contradicts fundamental fund risk and return characteristics.

D. The funds redeem shares at net asset value and offer investors professional management.
This option combines two true statements from A and B into one option. Since both components are accurate, this combined statement is true.

E. None of the other options are correct.
Because we have identified at least one statement that is false (C), saying that none of the other options are correct would itself be incorrect. In other words, option E is not true because C misstates a key feature, while the others (A, B, D) align with standard open-end mutual fund properties.

FINS5513-Investments & Portfolio Sel. - T3 2025

Which one of the following statements regarding open-end mutual funds is false?

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