For simplicity, suppose a mutual fund only owns shares of two stocks: 1 million shares of WMT, currently worth $108 per share and 2 million shares of NKE at $80 per share. The fund has accrued liabilities (mostly unpaid management fees) of $2 million. The fund has 5 million units outstanding. What is the NAV? Do not include the $ sign and answer to the nearest $0.01.
Question
For simplicity, suppose a mutual fund only owns shares of two stocks: 1 million shares of WMT, currently worth 80 per share. The fund has accrued liabilities (mostly unpaid management fees) of sign and answer to the nearest $0.01.
Solution
To calculate the Net Asset Value (NAV) of the mutual fund, follow these steps:
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Calculate the total value of the stocks owned by the mutual fund. This is done by multiplying the number of shares owned by the current price per share for each stock, and then adding these values together.
For WMT: 1,000,000 shares * 108,000,000 For NKE: 2,000,000 shares * 160,000,000
Adding these together gives a total stock value of $268,000,000.
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Subtract any liabilities the fund has from the total value of the stocks. In this case, the fund has liabilities of $2,000,000.
2,000,000 = $266,000,000
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Divide this value by the number of units outstanding to find the NAV per unit. The fund has 5,000,000 units outstanding.
53.20
So, the NAV of the mutual fund is $53.20 per unit.
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