Question 21.6.2. Molly recently inherited a small windfall and is trying to decide where to invest the money. She does not want to pick stocks. She would prefer to invest in either an index fund, a mutual fund (i.e., either open- or closed-end), or an exchange-traded fund (ETF). She is evaluating the following four funds:

• Fund I: The share price trades at its net asset value (NAV) with a fluctuating number of shares, but it cannot be shorted, and the trades are executed at the end of the business day
• Fund II: The share price generally trades at a discount (but sometimes at a premium) to its NAV with a fixed number of shares; it can be shorted and can be traded any time
• Fund III: The share price is equal to (or approximately equal to) the NAV because its assets are disclosed twice each day; it can be shorted and can be traded at any time
• Fund IV: This fund consistently has a very small tracking error of less than 10 basis points relative to the NASDAQ-100 Index, and its fees are very low because there is no active management

Which of the following correctly matches the fund’s characteristics to its type?