The Emerging Growth and Equity Fund is a “low-load” fund. The current offer pric

Question

The Emerging Growth and Equity Fund is a “low-load” fund. The current offer price quotation for this mutual fund is $21.47, and the front-end load is 1.4 percent. 1. What is the NAV? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Net asset value $ 2. If there are 15.3 million shares outstanding, what is the current market value of assets owned by the fund? (Do not round intermediate calculations and round market value answer to the nearest whole dollar. Omit the "$" sign in your response.) Market value of assets $

Explanation / Answer

NAV is determined by dividing the net assets of the fund by the total number of outstanding shares. The NAV must be computed at least once a day. The NAV is calculated at the end of trading on the New York Stock Exchange; orders to buy and sell the fund are based on the price to be computed at that time, so if an investor buys shares of the fund at 10:30am, the price paid will not be known until after the close of trading on that day.

a.

Current offer price = $21.47

Front load = 1.4%

NAV of mutual fund is calculated below:

NAV = $21.47 × (1 – 1.4%)

         = $21.17

Hence, NAV of mutual fund is $21.17 per share.

b.

Total number of share outstanding = 15.3 million

NAV per share = $21.17

Market value of mutual fund is calculated below:

Market value = $21.17 × 15.3 million

                       = $323.89 million

Hence, market value of mutual fund is $323.89 million.

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