For open-end funds, how are investors redeemed when they sell their shares?

• A. They are redeemed at their NAV.
• B. They are redeemed at the POP.
• C. They are redeemed at the fund's expense ratio.
• D. They are redeemed at the market price.

Answer: (A)

Redeeming shares in open-end funds is done at the fund’s net asset value per share. The NAV represents the value of the fund’s assets minus liabilities, divided by the number of outstanding shares, and is calculated daily. When you sell, the fund buys back your shares at this NAV per share (often with any applicable redemption fee). The price used for new shares, the POP, is NAV plus any sales charge, so it isn’t the redemption price. Market price applies to closed-end funds that trade on an exchange, not open-end funds. The expense ratio is simply the annual operating cost and doesn’t set redemption value. So, redemption is at NAV.