This workout asks us to identify whether the following statements are true or false regarding exchange-traded funds, or ETFs. The first statement is that ETFs can only be traded in the primary market. Whilst this is true of mutual funds, it is false with regards to ETFs since, as the name suggests, they can also be traded through exchanges in addition to primary markets. The next statement says that ETFs are typically passively managed funds. This is a true statement.

Most active managers do not wish to reveal these securities held within the fund at all times, which would be necessary for ETFs to facilitate the in-kind creation process. The next statement says that ETFs have tax advantages over mutual funds. This is true.

Traditional mutual funds only trade on a primary market basis. So if an investor wishes to liquidate their investment in the funds, the fund itself will need to sell some securities to fund the liquidation, which may trigger a tax event. This is not the case for ETFs since an investor can sell their shares in the ETF over an exchange should they wish to exit their position. The next statement says that there is a maximum size for an ETF. This is a false statement. ETFs are open-ended, so it can grow as large as they wish. The final statement says, "To buy shares in an ETS, you must pay cash to the fund." This is false. The in-kind creation process requires that you deliver a portfolio of securities to the fund in return for shares in the ETF itself.