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Q51 (CDS-I/2018) Economy › Industry, Infrastructure & Investment › Investment vehicles Answer Verified

Which one of the following statements about Exchange-Traded Fund (ETF) is not correct?

Result
Your answer: —  Â·  Correct: C
Explanation

Exchange-Traded Funds (ETFs) are marketable securities that track underlying assets and trade like common stocks on exchanges [1]. Statement 3 is incorrect because ETFs typically offer higher daily liquidity and lower fees compared to mutual fund shares. Many ETFs have lower expense ratios and streamlined operational costs because client service expenses are often passed to brokers [1]. Statement 1 is correct as they are marketable securities. Statement 2 is correct because ETFs experience intraday price changes based on market supply and demand [1]. Statement 4 is technically correct in the context of trading; while an ETF's Net Asset Value (NAV) is indeed calculated once daily after market close (typically 4 p.m. EST), investors do not transact at this NAV price. Instead, they trade at market prices throughout the day, unlike mutual funds which execute orders only once daily at the end-of-day NAV.

Sources

  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > Exchange Traded Fund (ETF) > p. 271
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