chap4 - Investments, Chapter 4 Answers to Selected Problems...

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Investments, Chapter 4 Answers to Selected Problems 2. An open-end fund has a net asset value of $10.70 per share. It is sold with a front-end load of 6 percent. What is the offering price? Answer: When a dollar is invested in this fund, $0.94 is used to purchase assets. That is, 94 percent of offering price is worth one share. If NAV is the value of one share, then 0 . 94 × offering price = NAV offering price = 10 . 70 0 . 94 = $11 . 38 . 3. If the offering price of an open-end fund is $12.30 per share and the fund is sold with a front-end load of 5 percent, what is its net asset value? Answer: If 95% of the offering price is used to buy one share at net asset value, this means that 0 . 95 × offering price = NAV NAV = 0 . 95 × 12 . 30 = $11 . 69 . 4. The composition of the Fingroup Fund portfolio is as in Table 1. The has not borrowed any funds, but its accrued management fee with the portfolio manager currently totals $30,000. There are 4 million shares outstanding. What is the net asset value of the fund? Answer: Total asset value is 200 , 000 × 35 + 300 , 000 × 40 + 400 , 000 × 20 + 600 , 000 × 25 = $42 , 000 , 000 . Hence net asset value is given by NAV = 42 , 000 , 000 - 30 , 000 4 , 000 , 000 = $10 . 49 . 1
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Stock Shares Price($) A 200,000 35 B 300,000 40 C 400,000 20 D 600,000 25 Table 1: Fingroup Fund portfolio. 5. Reconsider the Fingroup Fund in the previous problem. If during the year the portfolio manager sells all of the holdings of stock D and replaced it with 200,000 shares of stock E at $50 per share and 200,000 shares of stock F at $25 per share, what is the portfolio turnover rate? Answer:
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This note was uploaded on 03/01/2012 for the course FINANCE 780 taught by Professor Scott during the Spring '12 term at Missouri State University-Springfield.

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chap4 - Investments, Chapter 4 Answers to Selected Problems...

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