Intro (PLEASE SOLVE PART 5)

A mutual fund owns the following stocks: 17,000 shares of General Electric, 20,000 shares of IBM, and 72,000 shares of Exxon Mobile. The fund has to pay back-wages of $760,000, and has issued 1 million shares to mutual fund shareholders. The fund will receive a dividend of $10 per share from its holdings of General Electric stock in two weeks, which the fund manager will reinvest by buying more shares of GE. Ignore tax effects.

The stock prices for GE, IBM, and Exxon are as follows, respectively:

Time	GE	IBM	Exxon
10am	673	111	224
End of the day	676	106	231
14 days later	682	104	222

Part 1

What is the value of the fund's holdings of Exxon at the end of the day?

Value of a stock position: V_E = P_E * Q_E = 231 * 72,000 = 16,632,000

Attempt 2/5 for 9 pts.

Part 2

What is the total NAV (not per share) at the end of the day?

We need to calculate the value for GE and IBM, too: V_GE = P_GE * Q_GE = 676 * 17,000 = 11,492,000 V_I = P_I * Q_I = 106 * 20,000 = 2,120,000.

Total net asset value: NAV = V_E + V_GE + V_I - Liabilites = 16,632,000 + 11,492,000 + 2,120,000 -760,000 = 29,484,000

Attempt 2/5 for 9 pts.

Part 3

What is the NAV per share at the end of the day?

NAV per share=NAVNumber of shares issued=29,484,0001,000,000=29.48

Attempt 1/5 for 10 pts.

Part 4

If you place an order to buy 100 shares in the fund at 10am, how much will you have to pay in total?

Shares in mutual funds are sold (and bought back) at the NAV at day's end (after the end of trading).

You have to pay 100 * $29.48 = $2,948.

Attempt 4/5 for 7 pts.

Part 5

What's the return to an investor over the 14-day period if they submit a buy order at 10am (as in the previous question)? Back wages (an accrued liability to the fund) are now $608,000 after 2 weeks.