Regarding mutual fund liquidity, which statement is accurate?

Regarding mutual fund liquidity, which statement is accurate?

• A. They are illiquid and cannot be redeemed easily
• B. They are redeemable at net asset value only at year-end
• C. They are redeemable at net asset value daily
• D. They are redeemable on demand at a premium to NAV

Answer: (D)

Mutual fund liquidity comes from the ability to redeem shares with the fund sponsor at the net asset value per share, calculated daily. When you submit a redemption request, you receive the fund’s current NAV per share for that business day, not a higher price. There isn’t a premium to NAV for redemptions. Some funds may impose a redemption fee or a back-end load if you redeem soon after purchase, but that affects the amount you receive, not the NAV itself. In contrast, options like trading on an exchange or premium/discount dynamics are characteristic of other fund structures (such as closed-end funds or some ETFs), not open-end mutual funds. So the accurate statement is that mutual funds are redeemable at NAV on a daily basis, with any fees applied according to the fund’s policy.

Mutual fund liquidity comes from the ability to redeem shares with the fund sponsor at the net asset value per share, calculated daily. When you submit a redemption request, you receive the fund’s current NAV per share for that business day, not a higher price. There isn’t a premium to NAV for redemptions. Some funds may impose a redemption fee or a back-end load if you redeem soon after purchase, but that affects the amount you receive, not the NAV itself. In contrast, options like trading on an exchange or premium/discount dynamics are characteristic of other fund structures (such as closed-end funds or some ETFs), not open-end mutual funds. So the accurate statement is that mutual funds are redeemable at NAV on a daily basis, with any fees applied according to the fund’s policy.