SIE (Securities Industry Essentials) Practice Exam

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The redemption value of an open-end investment company's shares is determined by the:

Fixed price at the start of the day
NAV computed after the order is received
Previous day’s closing price
Price set by the investor

The correct answer is: NAV computed after the order is received

Open-end investment companies, also known as mutual funds, have a constantly changing value for their shares. This value is known as the net asset value (NAV) and is determined by the total value of all the investments in the fund divided by the total number of shares outstanding. This value is updated and computed at the end of each trading day. Each share of the fund is then redeemed at the NAV computed after the order is received, making option B the correct answer. The other options are incorrect because they do not accurately reflect the process of determining the redemption value of an open-end investment company's shares. Option A refers to a fixed price, which is not applicable in this case as the NAV is constantly changing. Option C refers to the previous day's closing price, which may not reflect the current value of the fund's shares. Option D refers to a price set by the investor, which is not how shares in an open-end investment company are redeemed as they are bought and sold at the NAV.