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On August 31, a mutual fund has the following assets and prices at 4:00pm. Stock Shares owned Price 1 1,000 $2 2 5,000 $4

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On August 31, a mutual fund has the following assets and prices at 4:00pm. Stock Shares owned Price 1 1,000 $2 2 5,000 $4 3 1,000 $5 4 10,000 $1 5 3,000 $3 Cash N/A 4500 Liabilities 0 Suppose at 6:30pm, Stock 3 announces an increase in earnings, and the price of stock 3 jumps to $8 in after-market trading. If the fund (illegally) allows investors to buy at the current NAV (NAV at trading hours on August 31), how many shares will $10,000 buy? What is the gain for the investors to such illegal trades? Assume 1,000 shares are outstanding before the trades.

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