Question
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.
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