A Major Question in Modern Finance Regarding Closed-End Investment Companies

question 14

Multiple Choice

A major question in modern finance regarding closed-end investment companies is

• A) Why do these funds sell at discounts?
• B) Why do the discounts differ between funds?
• C) What are the returns available to investors from funds that sell at a large discount?
• D) Choices a and b
• E) All of the above.

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Definitions:

Return on Equity

A financial ratio that measures the profitability of a business in relation to shareholders' equity.

Profit Margin

A financial ratio that shows the percentage of revenue remaining after all operating expenses, interest, taxes, and dividends have been deducted.

Return on Assets

A financial ratio indicating how efficiently a company is using its assets to generate earnings.

Return on Assets

A financial ratio indicating how profitable a company is relative to its total assets, measuring the efficiency of asset use in generating profit.