In the notes it says that ETFs trade at NAV otherwise there would be arbitrage, but the solution to Oct 2011 q3(i) says they may not trade at NAV... Which is correct? Or do the notes just mean they will usually be round about NAV and the question solution means it will not be EXACTLY NAV? Thanks
Nav Hi We revised the notes on this topic for next year because its a bit confusing. Basically ETFs almost always trade VERY close to the NAV because the possibility of arbitrage exists. But they may not be exactly on the NAV. (This is unlike a unit trust which will be priced exactly relative to its NAV.)
