Open-end fund A owns 165 shares of AT&T valued at $35 each and 30 shares of Toro

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Open-end fund A owns 165 shares of AT&T valued at $35 each and 30 shares of Toro valued at $75 each. Closed-end fund B owns 75 shares of AT&T and 72 shares of Toro. Each fund has 1,000 shares of stock outstanding.

a. What are the NAVs of both funds using these prices?

b. Assume that in one month the price of AT&T stock has increased to $36.25 and the price of Toro stock has decreased to $72.292. How do these changes impact the NAV of both funds? If the funds were purchased at the NAV prices in part (a) and sold at month end, what would be the realized returns on the investments?

c. Assume that another 155 shares of AT&T are added to fund A. The funds needed to buy the new shares are obtained by selling 676 more shares in fund A. What is the effect on fund A’s NAV if the stock prices remain unchanged from the original prices?

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a NAV openend 165 x 35 30 x 751000 8025 NAV closedend 75 x 35 72 x 751000 ...View the full answer

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Financial Institutions Management A Risk Management Approach

ISBN: 978-1259717772

9th edition

Authors: Anthony Saunders, Marcia Millon Cornett

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Question Posted: May 27, 2019 11:09 AM

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Open-end fund A owns 165 shares of AT&T valued at $35 each and 30 shares of Toro

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a NAV openend 165 x 35 30 x 751000 8025 NAV closedend 75 x 35 72 x 751000 ...View the full answer

Financial Institutions Management A Risk Management Approach

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