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How do closed-end funds determine dividend rates in the event of failed auctions?

April 26, 2017auctions closed-end determine dividend event failed funds rates

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How do closed-end funds determine dividend rates in the event of failed auctions?

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In the event of a failed auction, closed-end funds pay a dividend rate based on a formula established when the shares were first issued. This rate, referred to as the “maximum” rate, is determined by reference to short-term interest rates and is explained in the fund’s prospectus.