Regarding mutual fund liquidity, which statement is accurate?

• A. They are illiquid and cannot be redeemed easily
• B. They are redeemable at net asset value only at year-end
• C. They are redeemable at net asset value daily
• D. They are redeemable on demand at a premium to NAV

Answer: (D)

Mutual fund liquidity comes from the ability to redeem shares with the fund sponsor at the net asset value per share, calculated daily. When you submit a redemption request, you receive the fund’s current NAV per share for that business day, not a higher price. There isn’t a premium to NAV for redemptions. Some funds may impose a redemption fee or a back-end load if you redeem soon after purchase, but that affects the amount you receive, not the NAV itself. In contrast, options like trading on an exchange or premium/discount dynamics are characteristic of other fund structures (such as closed-end funds or some ETFs), not open-end mutual funds. So the accurate statement is that mutual funds are redeemable at NAV on a daily basis, with any fees applied according to the fund’s policy.