Fedders Asia Closed End fund is a closed-end equity fund that holds Asian securities with a market value of $1 billion. Over the past 10 years, the fund has earned a return of 9% a year, 3% less than the return earned by index funds investing in Asia. You expect annual returns in the future to be similar to those earned in the past, both for your fund and for index funds in general.

a. Assuming no growth in the fund and investment in perpetuity, estimate the discount at which you would expect the fund to trade.

b. How would your answer change if you expect the fund to be liquidated in 10 years?