Definition
Closed-end funds raise capital through an IPO and issue a fixed number of shares that trade on exchanges. Unlike open-end funds, they don't create or redeem shares based on demand. This means they can trade at premiums or discounts to their net asset value (NAV). Many use leverage to enhance returns.
Formula
Discount/Premium = (Market Price - NAV) / NAV × 100%
Example
A closed-end bond fund with $20 NAV trades at $18, representing a 10% discount. Investors buy $20 of assets for $18.
FAQ
What is Closed-End Fund?
A fund that issues a fixed number of shares that trade on exchanges.
How do you calculate Closed-End Fund?
A common formula for Closed-End Fund is: Discount/Premium = (Market Price - NAV) / NAV × 100%
Why is Closed-End Fund important?
Closed-End Fund helps investors evaluate fund types and make more informed decisions.