do not redeem or issue shares. Investors in closed-end funds who wish to cash out must sell their shares to other investors. Shares of closed-end funds are traded on organized exchanges and can be purchased through brokers just like other common stock; their prices therefore can differ from NAV. Figure 4.1 is a listing of closed-end funds from The Wall Street Journal. The first col- umn after the name of the fund indicates the exchange on which the shares trade (A: Amex; I. Introduction 4. Mutual Funds and Other Investment Companies The McGraw−Hill Companies, 2001           CHAPTER 4 Mutual Funds and Other Investment Companies 107     C: Chicago; N: NYSE; O: Nasdaq; T: Toronto; z: does not trade on an exchange). The next three columns give the funds most recent net asset value, the closing share price, and the percentage difference between the two, which is (Price - NAV)/NAV. Notice that there are more funds selling at discounts to NAV (indicated by negative differences) than premiums. Finally, the 52-week return based on the percentage change in share price plus dividend in- come is presented in the last column. The common divergence of price from net asset value, often by wide margins, is a puz- zle that has yet to be fully explained. To see why this is a puzzle, consider a closed-end fund that is selling at a discount from net asset value. If the fund were to sell all the assets in the portfolio, it would realize proceeds equal to net asset value. The difference between the market price of the fund and the funds NAV would represent the per-share increase in the wealth of the funds investors. Despite this apparent profit opportunity, sizable dis- counts seem to persist for long periods of time. Interestingly, while many closed-end funds sell at a discount from net asset value, the prices of these funds when originally issued are typically above NAV. This is a further puz- zle, as it is hard to explain why investors would purchase these newly issued funds at a pre- mium to NAV when the shares tend to fall to a discount shortly after issue. Many investors consider closed-end funds selling at a discount to NAV to be a bargain. Even if the market price never rises to the level of NAV, the dividend yield on an invest- ment in the fund at this price would exceed the dividend yield on the same securities held outside the fund. To see this, imagine a fund with an NAV of $10 per share holding a port- folio that pays an annual dividend of $1 per share; that is, the dividend yield to investors that hold this portfolio directly is 10%. Now suppose that the market price of a share of this closed-end fund is $9. If management pays out dividends received from the shares as they come in, then the dividend yield to those that hold the same portfolio through the closed-