Question

Problem 17-4 (LG 17-5)

Suppose today a mutual fund contains 2,000 shares of JPMorgan
Chase, currently trading at $69.75, 1,000 shares of Walmart,
currently trading at $68.10, and 2,500 shares of Pfizer, currently
trading at $36.50. The mutual fund has no liabilities and 10,000
shares outstanding held by investors.

**a.** What is the NAV of the fund?

**b.** Calculate the change in the NAV of the fund if
tomorrow JPMorgan’s shares increase to $71, Walmart’s shares
increase to $73, and Pfizer’s shares decrease to $35.

**c.** Suppose that today 1,000 additional investors
buy one share each of the mutual fund at the NAV of $29.885. This
means that the fund manager has $29,885 in additional funds to
invest. The fund manager decides to use these additional funds to
buy additional shares in JPMorgan Chase. Calculate tomorrow’s NAV
given the same rise in share values as assumed in (b).

(For all requirements, do not round intermediate calculations.
Round your answers to 3 decimal places. (e.g.,
32.161))

Answer #1

A) 29.885

B).365

C)30.216

3)
A mutual fund has 250 shares
of 3M, currently
trading at $160 and 500 shares of Aflac.
currently
trading at $60. The fund has2,500 shares
outstanding. (LG 17-5)
a.
What is the NAV of the fund?
b.
If investors expect the price of 3M to increas to
$180 and
the price of Aflac to decline to $40 by the end of
the
year, what is the expected NAV at the end of the
year?
c.
Assume that the price...

On January 1st, the shares and prices for a mutual fund at 4:00
pm are:
Stock
Shares owned
Price
1
1,000
$ 1.92
2
5,000
$ 41.18
3
3,800
$ 19.08
4
9,200
$ 37.19
5
2,000
$ 2.51
cash
n.a.
$5,353.40
Liabilities
$1,500
Stock 3 announces record earnings, and the price of stock 3
jumps to $33.44 in after-market trading. If the fund (illegally)
allows investors to buy at the current NAV, how many shares will
$50,000 buy? If...

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