AppliedMultiple choice
An equity ETF trades at a premium to the value of its underlying basket. What does an authorised participant do to profit, and what is the effect?
- ABuys ETF shares and redeems them for the basket, pushing the premium wider
- BBuys the basket, creates ETF shares and sells them
- CShorts the basket and buys the ETF, locking in the premium as it widens
- DNothing, since only the issuer can create or redeem shares
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