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Case 4: Mutual Funds Suppose there is an open-end mutual fund that contains stocks A, B and C and has 14,000 outstanding shares. The current
Case 4: Mutual Funds Suppose there is an open-end mutual fund that contains stocks A, B and C and has 14,000 outstanding shares. The current prices of the stocks are shown as below: You are required to calculate Net Asset Value (NAV) and costs of funds under the following scenarios. In addition, in this case you will notice that due to capital appreciation and change in investment size, the NAV will be affected. Tasks: Answer the following questions 1) What is the NAV for the fund? (3 Marks) 2) Suppose the share prices change and the mutual fund has the following assets and prices: What is the percentage change of the NAV? (4 Marks) 3) Suppose that 800 additional investors buy one share at the NAV calculated in question 1. Suppose the fund manager decides to use these funds to buy additional shares of Stock C at 20.41. Now, this portfolio will consist of different number of shares that can affect the new NAV. What would be the NAV now? (4 Marks) 4) Suppose an individual invests 25,000 in a load mutual fund. The load fund entails an up-front commission charge of 4 percent of the amount invested and is deducted upfront. In addition, annual fund operating expenses are 0.85 percent, which is charged on the average net asset value invested in the fund. The return on this fund is 6 percent each year paid on the last day of the year. What would be the investor's return on this fund after one year? (5 Marks) 5) Check the Investment Company Institute Web site at www.ici.org. Go to "Statistics" - "Quarterly Closed-End Assets". How much have closed end funds changed since 2020 (consider funds since 2021, if you do not find data for 2020)? (4 Marks)
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