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True or False It is possible for ETF prices to diverge significantly from their net asset...

True or False

It is possible for ETF prices to diverge significantly from their net asset value

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Answer #1

True, it is possible for ETF prices to diverge significantly from their net asset value (NAV)

An exchange-traded fund (ETF) market price is the price at which shares in the ETF can be bought or sold on the exchanges during trading hours. Where as the net asset value is determined by adding up the value of all assets in the fund, including assets and cash, subtracting any liabilities, and then dividing that value by the number of outstanding shares in the ETF.

As these are trading on exchanges, supply and demand decides that market price. If the market value gets too high compared to the NAV, there would be significant divergence from their net asset value

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