The correct answer is: C. unit investment trust.
A unit investment trust (UIT) is a type of investment company that is similar to an open-end mutual fund. However, unlike a mutual fund, a UIT is unmanaged, meaning that there is no fund manager who actively buys and sells securities. Instead, the portfolio of a UIT is fixed at the time it is created, and the trustee is responsible for holding the securities in the portfolio until they mature or are called.
UITs are typically used to invest in fixed income securities, such as bonds and preferred stocks. They are often marketed to investors who are looking for a low-cost, diversified way to invest in these types of securities.
Here is a brief explanation of each option:
- A junk bond fund is a type of mutual fund that invests in high-yield, or “junk,” bonds. Junk bonds are bonds that are rated below investment grade by credit rating agencies. These bonds are considered to be more risky than investment-grade bonds, but they also offer the potential for higher returns.
- A closed-end investment company is a type of investment company that issues a fixed number of shares. Once all of the shares have been sold, the company cannot issue any more shares. Closed-end funds are traded on stock exchanges like stocks, and their prices can fluctuate based on supply and demand.
- A hedge fund is a type of investment fund that is open to a limited number of accredited investors. Hedge funds are often more complex and risky than other types of investment funds, and they typically require a higher minimum investment.
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