All Courses > ETFs > 100
ETFs 101: Exchange-Traded Funds

Find out what you learned

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Exchange-traded funds typically are _______.
Choose wisely. There is only one correct answer.
Passively managed, or indexed. For the arbitrage mechanism to work, potential arbitragers must have full, timely knowledge of the ETF's holdings. Active managers rarely disclose this information more than twice per year, though, which is why indexing has been the strategy of choice for ETFs thus far.
2.
Which statement is false about exchange-traded funds?
Choose wisely. There is only one correct answer.
ETFs are always the cheaper choice for all investors. Although the annual expenses of ETFs are below those of mutual funds, you must pay a commission each time you buy an ETF. As a result, ETFs may not be cheaper choices for investors who invest a little bit at a time, or those who trade actively.
3.
In general, exchange-traded funds are cheaper to buy than index mutual funds if you want to trade regularly.
Choose wisely. There is only one correct answer.
False. Because of their commissions, regular trading will likely cost you more with exchange-traded funds.
4.
Compared to mutual funds, exchange-traded funds are ______ to make capital-gains distributions.
Choose wisely. There is only one correct answer.
Less likely. However, at times they must, in order to adjust for changes to their underlying indexes.
5.
In what form do investors buy or redeem shares from an exchange-traded fund?
Choose wisely. There is only one correct answer.
In blocks of a certain number. The blocks are typically in groups of 50,000 shares.
DONE