The Main Difference Between a Closed-End Fund and an Open-End

question 26

Multiple Choice

The main difference between a closed-end fund and an open-end fund is

• A) the way each is traded after the initial public offering.
• B) there is no significant difference.
• C) the minimum initial investment.
• D) the type of allowable investments.
• E) the way in which each is regulated by the SEC.

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Definitions:

Discount Rate

The rate of interest that is employed in discounted cash flow calculations to assess the present-day worth of cash flows that are expected to occur in the future.

Overhaul Costs

Expenses incurred for significant repairs or major restoration of equipment, machinery, or buildings which extend their life but do not qualify as capital expenses.

Incremental Cost Approach

An analysis technique that focuses on the additional costs and benefits associated with a particular decision or project.

Discount Rate

The interest rate used to discount future cash flows of a project or investment to their present value, reflecting the opportunity cost of capital.