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Net asset value (NAV) is determined by a. Supply and demand for the investment company stock...

Net asset value (NAV) is determined by a. Supply and demand for the investment company stock in the secondary market. b. The total market value of all its assets multiplied by the number of fund shares outstanding. c. Supply and demand for the investment company stock in the primary market. d. The total market value of all its assets divided by the number of shareholders. e. The total market value of all its assets divided by the number of fund shares outstanding.

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Answer #1

Answer is Option e.

Mathematically, Net Asset Value = (assets - liabilities) / number of outstanding shares.

Now, looking at the options.

Option A and C are incorrect. Supply and demand for investment company stock in secondary market or primary market determines share price of the investment company and not the NAV.

Option B is incorrect because of the term 'multiplied' use.

Option D is incorrect as assets are divided by number of fund shares outstanding.

Hence, Option E stands closest to definition. Remember, while calculating NAV, numerator should be Net Asset = Total Assets - Total Liabilities.

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