ARE143_CHAP_4_KEY

# ARE143_CHAP_4_KEY - 1 Managerial Economics (ARE) 143...

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2 Problem 6: An open-end mutual fund has the following stocks: Shares Stock price Stock A 4,000 \$68.00 Stock B 9,000 \$32.00 Stock C 6,500 \$44.00 Stock D 8,400 \$56.00 Mutual fund 50,000 (a) If there are 50,000 shares of the mutual fund, what is its NAV? Total assets = (4,000 × \$68) + (9,000 × \$32) + (6,500 × \$44) + (8,400 × \$56) = \$1,316,400 NAV = \$1,316,400 / 50,000 = \$26.33 (b) Suppose the fund has liabilities of \$75,000. What is the NAV of the fund now? NAV = (\$1,316,400 – 75,000) / 50,000 = \$24.83 (c) Assume the fund is sold with a 5 percent front-end load. What is the offering price of the fund? Offering price = \$24.83 / (1 – .05) = \$26.14 Problem 7: A mutual fund sold \$75 million of assets during the year and purchased \$68 million in assets. If the average daily assets of the fund was \$120 million, what was the fund turnover?
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## This note was uploaded on 01/13/2012 for the course ARE 143 taught by Professor Brinkley,g during the Spring '08 term at UC Davis.

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ARE143_CHAP_4_KEY - 1 Managerial Economics (ARE) 143...

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