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NEW QUESTION: 1
Which of the following statements regarding closed-end investment companies is false?
A. A closed-end investment company may not issue preferred stock.
B. Shares of a closed-end company may sell for below the fund's net asset value.
C. Closed-end companies may be either diversified or non-diversified.
D. The closed-end investment company does not pay taxes on the dividend and capital gain income it earns and distributes to its shareholders.
Explanation: The false statement is that a closed-end investment company may not issue preferred stock.
Although open-end companies (mutual funds) are prohibited from doing so, this is not a restriction governing closed-end companies. Closed-end companies shares sell on exchange floors and may trade below net asset value. Closed-end companies may be either diversified or non-diversified, and the income earned by the company and distributed to its shareholders is not taxed at the investment company level. It is taxed at the shareholder level only.
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