Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. (10 Points) Blue Fund is an open-end mutual fund. Blue Fund contains 100 shares of Red Shoes Corporation, 200 shares of Happy Handbags Corporation,

2. (10 Points) Blue Fund is an open-end mutual fund. Blue Fund contains 100 shares of Red Shoes Corporation, 200 shares of Happy Handbags Corporation, and 300 shares of Joyful Home Corporation. The price of a share of Red Shoes Corporation is $30. The price of a share of Happy Handbags Corporation is $25. The price of a share of Joyful Home Corporation is $22. There are 800 shares outstanding for Blue Fund. Assume Blue Fund has zero liabilities. b) Suppose 200 additional investors buy the stock of Blue Fund at $18.25 at end of year 1. Each investor buys one new share of Blue Fund. Suppose Blue Fund invests the money it receives from selling its new shares to buy additional shares of Red Shoes Corporation (at the end of year 1). Assume that the prices of the shares of all three corporations remain the same (as above) until the end of year 1. Assume liabilities remain zero. How many new shares of Red Shoes Corporation does Blue Fund buy at the end of year 1? Show your calculations.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Theory And Practice

Authors: Eugene F Brigham, Michael C Ehrhardt

11th Edition

0324259689, 9780324259681

More Books

Students also viewed these Finance questions