A mutual fund has a NAV of 1070 per share It is sold with a front end load of 6

A mutual fund has a nav of 1070 per share it is sold

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7.  A mutual fund has a NAV of $10.70 per share. It is sold with a front-end load of 6%. What’s offering price?8. If the offering price of a mutual fund is $12.30 per share and the fund is sold with a front-end load of 5%, what is its net asset value? 9. The composition of the Fingroup Fund portfolio is as follows: The fund has not borrowed any funds, but its accrued management feewith the portfolio manager currently totals $30,000. There are 4 millionshares outstanding. What is the net asset value of the fund? Answers:       9.   Stock | Value held by fund 
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         A     $ 7,000,000           B      12,000,000           C       8,000,000           D      15,000,000       Total    $42,000,000  Net asset value = (42,000,000-30,000)/4,000,000 = 10.49 Ch. 3-4 Notes: Limit Order: Ask Price- Lowest Price among unfilled sell orders (lowest you can buy) Bid Price- Highest price among unfilled buy orders (highest price you can sell) Bid ask Spread=ask price-bid price, high=low liquidity, expensive to trade, vice versa Market Order : Buy order-Buy shares at lowest price and walk up the order book Sell order- start with bid price and walk down the order book Liquidity Provider: Someone who does not want to hold a position in the asset but provides liquidity by selling to buyers at the ask price and buying from sellers at the bid Short sale: sell shares today, buy in future (if company pays dividends you pay that amount to the share lender; a cash outflow Margin Requirements: Maintenance Margin Requirement: sum of maintenance margin for all positions (must be less than portfolio NAV) Excess Margin Capacity : (portfolio NAV- maintenance margin requirement) Initial Margin Requirement: initial margin for new positions< current excess margin capacity Chapter 4 Investment Companies ETF : a shell company whose assets are a portfolio of stocks At any time you can trade a share of ETF for the underlying assets, vice versa If demand for ETF is high, price of ETF exceeds NAV (arbitrage opportunity), buy underlying portfolio, trade for ETF shares, sell ETF share o Increases shares outstanding, and vice versa Mutual Fund NAV = (market value of assets-market value of liabilities)/shares outstanding Mutual Fund Fees Front End Load: % of initial investment, 1000$ gets you $970 in fund Redemption fees: % of withdrawal Annual Operating Expenses: charged as a % of NAV directly from fund assets not investors, include mgmt. fees and Rule 12b-1 fees for marketing expenses Hedge Fund Fees Mgmt fee: percent of assets under mgmt. Performance fee: percent of any investment profits beyond some benchmark Investment in practice Hedge Fund Strategies
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Directional: Bet on asset class or sector increase or decrease Non-directional: bet on relative convergence or divergence b/w assets. o Find portfolio with alpha P= a +b(Rm) +e, o sell an offsetting amount of the market portfolio B(Rm) o
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