The Closed Fund is a closed-end investment company with a portfolio currently worth $195 million. It has liabilities of $20 million and 5 million shares outstanding. a. What is the NAV of the fund? (Round your answer to 2 decimal places.) b. If the fund sells for $40 per share, what is its premium or discount as a percent of net asset value? (Input the amount as a positive value. Round your answer to 2 decimal places.)

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Douglas Wood

12 August, 19:22

The Closed Fund is a closed-end investment company with a portfolio currently worth $195 million. It has liabilities of $20 million and 5 million shares outstanding. a. What is the NAV of the fund? (Round your answer to 2 decimal places.) b. If the fund sells for $40 per share, what is its premium or discount as a percent of net asset value? (Input the amount as a positive value. Round your answer to 2 decimal places.)

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Summer Compton · Answer 1

NAV is $35 per share

premium is 14.30%

Explanation:

The formula for net asset value can be used in calculating the NAV of thi closed fund before comparing the NAV with selling price of the fund in order to ascertain whether a discount or premium has been recorded on the fund as shown below:

NAV=Total assets - total liabilities/number of shares

total fund assets is worth $195 million

total fund liabilities is $20 million

there are 5 million shares outstanding

NAV=$195 million-$20 million/5 million

=$175 million/5 million

=$35.00 per share

Premium on the fund = ($40-$35) / $35

=$5/$35

=14.30% premium

The fund has 14.30% premium