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How liquid are Auction-Rate Preferred Shares?

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How liquid are Auction-Rate Preferred Shares?

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Auction-Rate Preferred Shares do not necessarily provide daily liquidity, but rather provide liquidity through a regularly scheduled auction process. These shares are purchased and sold at regular auctions conducted by fund sponsors. Investors submit bids through their broker’s preferred stock desk, indicating the number of shares desired and the desired dividend rate. Shareholders may also offer their shares for sale in the secondary market, although the amount received in the secondary market is subject to forces of supply and demand, and may be different than the original amount invested (and may involve a brokerage commission).

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