Question

In: Finance

What is an ETF? What is a Bond ETF? What is NAV in relation to ETFs?...

  • What is an ETF?
  • What is a Bond ETF?
  • What is NAV in relation to ETFs?
  • What type of investor should invest in a bond ETF?

Your answers to these questions should be detailed and clearly demonstrate that you understand the concept of ETFs and their implications.

Solutions

Expert Solution

An ETF or exchange traded fund is a basket of assets (such as stocks or bonds) that can be traded on a stock exchange. The benefit of an ETF is that it helps investors diversify their investments in a highly liquid manner. It is like a mutual fund that can be traded in real time. Investors can buy a certain number of units of this kind of a fund. This is analogous to an investor buying a certain number of stocks in a company.

A bond ETF is an exchange traded fund that is composed of bonds. It can consist of both government and corporate bonds.

NAV or net asset value is the total market value of an exchange traded fund divided by its total number of units. It is the essentially the price at which an investor can buy or sell one unit of an exchange traded fund.

A relatively risk averse investor would like to invest in a bond ETF as bonds are less risky than stocks.


Related Solutions

You are investing in the ProShare ETFs in your trading account. The ultra ETFs are designed...
You are investing in the ProShare ETFs in your trading account. The ultra ETFs are designed to provide twice the daily return of the underlying benchmark indexes. (10 points) (i) Is the risk of the ultra-ETFs, measured by standard deviation of the daily return, twice the risk of the underlying index? Show your result. (ii) Explain why the monthly return of the ProShare ultra-ETF may not equal twice the monthly return of the index.
1. What is a mutual fund? What is an ETF? How are they different? 2. What...
1. What is a mutual fund? What is an ETF? How are they different? 2. What are some arguments for why a mutual fund is better than an ETF? What are some of the arguments for why an ETF is better than a mutual fund? 3. Do professional money managers add value by picking the “right” (profitable) investments? 4. In shopping for stock mutual funds, what are the key, listed risk characteristics? 5. In shopping for bond mutual funds, what...
Investing: Inverse ETFs (Exchange Traded Funds)   Inverse ETFs, sometimes referred to as "bear market" or "short" funds,...
Investing: Inverse ETFs (Exchange Traded Funds)   Inverse ETFs, sometimes referred to as "bear market" or "short" funds, are designed to deliver the opposite of the performance of the index or category they track, and so can be used by traders to bet against the stock market. The following table shows the performance of three such funds as of August 5, 2015.† Year-to-Date Loss (%) MYY (ProShares Short Midcap 400) 6 SH (ProShares Short S&P 500) 5 REW (ProShares UltraShort Technology) 7...
What are the properties of a correlation? What is a “negative” relation and what is a “positive” relation?
What are the properties of a correlation? What is a “negative” relation and what is a “positive” relation? Give examples of each using real variables.
What is a relation? What is a relational DB or database? What is an unnormalized relation?...
What is a relation? What is a relational DB or database? What is an unnormalized relation? Is it a relation according to the definition of the word relation? What is a primary key? What is the primary key for each table in the Colonial Adventure Tours database shown in Figures 1-15, 1-16, 1-17, 1-18, and 1-19 in Chapter 1?
What are some of the advantages and disadvantages of investingin Exchange Traded Funds (ETFs) versus...
What are some of the advantages and disadvantages of investing in Exchange Traded Funds (ETFs) versus investing in individual stocks? Would you prefer to invest in ETFs or individual companies and why?
A closed-end fund starts the year with a NAV of $12.55. By year-end, NAV equals $11.36....
A closed-end fund starts the year with a NAV of $12.55. By year-end, NAV equals $11.36. At the beginning of the year, the fund was selling at a 5% discount to NAV. By the end of the year, the fund is selling at a 1% premium to NAV. The fund paid year-end distributions of income and capital gains of $1.21. What is the rate of return to an investor in the fund during the year? Round your answer to 4...
What does it mean for a relation is a partial order relation?
What does it mean for a relation is a partial order relation?
Critically evaluate NAV of a Mutual fund.
Critically evaluate NAV of a Mutual fund.
Which of the following statement(s) regarding the exchange-traded funds (ETF) is (are) correct? I. Individual ETF...
Which of the following statement(s) regarding the exchange-traded funds (ETF) is (are) correct? I. Individual ETF shares are traded on the exchanges II. An authorized participant can redeem ETF shares directly from the ETF provider. III. The “redemption-in-kind” process helps ETF(s) to maximize tax efficiency. A. Only I B. Only II C. I and III D. I and II E. I, II, and III
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT