The Closed Fund is a closed-end investment company with a portfolio currently worth $200 million. It has liabilities of $3 million and 5 million shares outstanding. a. What is the NAV of the fund? (Round your answer to 2 decimal places.) NAV $ b. If the fund sells for $36 per share, what is its premium or discount as a percent of NAV? (Input the amount as a positive value. Round your answer to 2 decimal places.) The fund sells at a(n) % from NAV.

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andromache andromache · Answer 1 · 2019-10-14T13:36:55+02:00

Answer:

a. $39.40 per share

b. 8.63%

Explanation:

a. The computation of the NAV of the fund is shown below:

= (Assets - liabilities) ÷ (Number of outstanding shares)

= ($200 million - $3 million) ÷ (5 million shares)

= ($197 million) ÷ (5 million shares)

= $39.40 per share

b. The computation of the premium or discount as a percent of NAV is shown below:

Since the selling price is $36 but its NAV is $39.40

So, the discount would be equal to

= $39.40 - $36

= $3.40

The discount percentage equals to

= $3.40 ÷ $39.40

= 8.63%