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(Chapter 4) You are an individual investor who is bullish on the finance sector of the...

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Finance

(Chapter 4) You are an individual investor who is bullish on thefinance sector of the US equity market. Rather than purchase sharesof stock of several individual firms in the sector, you decide toreduce trading costs by purchasing XLF, a US finance sector equityETF. How can you be confident that the price of the XLF willclosely track the net asset value (NAV) of the underlying shares ofstock in the benchmark index?

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Net asset value NAV represents a funds per unit market value This is the price at which investors buy fund units from a fund company or sell it back to the fund house It is calculated by dividing the total value of all the assets in a portfolio minus all its liabilities The NAV of a fund is calculated by the mutual fund house itself    See Answer
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(Chapter 4) You are an individual investor who is bullish on thefinance sector of the US equity market. Rather than purchase sharesof stock of several individual firms in the sector, you decide toreduce trading costs by purchasing XLF, a US finance sector equityETF. How can you be confident that the price of the XLF willclosely track the net asset value (NAV) of the underlying shares ofstock in the benchmark index?

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