An investment fund has the following assets in its portfolio: $37 million in fix
ID: 2806941 • Letter: A
Question
An investment fund has the following assets in its portfolio: $37 million in fixed-income securities and $37 million in stocks at current market values. In the event of a liquidity crisis, it can sell its assets at a 91 percent discount if they are disposed of in three days. It will receive 93 percent if disposed of in five days. Two shareholders, A and B, own 5 percent and 7 percent of equity (shares), respectively.
Market uncertainty has caused shareholders to sell their shares back to the investment fund. What will the two shareholders receive if the investment fund must sell all its assets in three days? In five days? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. (e.g., 32.16))
An investment fund has the following assets in its portfolio: $37 million in fixed-income securities and $37 million in stocks at current market values. In the event of a liquidity crisis, it can sell its assets at a 91 percent discount if they are disposed of in three days. It will receive 93 percent if disposed of in five days. Two shareholders, A and B, own 5 percent and 7 percent of equity (shares), respectively.
Explanation / Answer
Statement showing amount that shareholders will receive if investment fund sell all its assets in three days
Statement showing amount that shareholders will receive if investment fund sell all its assets in Five days
Particulars Amount(in million) Value of Fixed income securities if sold in 3 days 37million*0.91 33.67 Value of stock if sold in 3 days 37million*0.91 33.67 67.34 Shareholder will receive as follows A 67.34*0.05 3.17 B 67.34*0.07 4.43Related Questions
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