SIE Understanding Products and Their Risks Question 88: Answer and Explanation

Question: 88

Which of the following is most similar to a typical mutual fund?

• A. Hedge fund
• B. Exchange-traded Note (ETN)
• C. Exchange-traded Fund (ETF)
• D. Limited partnership

Correct Answer: C

Explanation:

C: Choice C is correct because ETFs are registered investment companies and provide diversification, professional management, and liquidity, as mutual funds do. Choice A is incorrect because of uncertain diversification and illiquidity. Choice B is incorrect because ETNs do not necessarily provide diversification or professional management. Choice D is incorrect because limited partnerships do not necessarily provide diversification or liquidity.