Which one of the following statements about Exchange-Traded Fund (ETF) is not correct?
- A.It is a marketable security.
- B.It experiences price changes throughout the day.
- C.It typically has lower daily liquidity and higher fees than mutual fund shares.
- D.An ETF does not have its net asset value calculated once at the end of every day.
Correct answer
Explanation
The correct answer is C, It typically has lower daily liquidity and higher fees than mutual fund shares.. An Exchange-Traded Fund holds a basket of assets, such as the shares of an index, gold or bonds, and its units are listed and traded on a stock exchange like a share. Because they can be bought and sold through the trading day, ETFs usually offer higher daily liquidity, and because most of them passively track an index, they usually charge lower fees than actively managed mutual funds. So statement C has both points the wrong way round. Option A is a correct statement, since ETF units are marketable securities listed on an exchange. Option B is correct, since an ETF's price moves through the day with demand and supply. Option D is also a correct description: a mutual fund's units are bought and sold only at the single net asset value struck at the end of the day, whereas an ETF trades at market prices all day. Exam tip: ETF means exchange trading through the day, high liquidity and low cost; mutual fund means one end-of-day NAV.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
Show answer
Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
Show answer
UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
Show answer
The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
Read the full explanation →