Friday, 26 September 2014

The Closed Fund is a closed-end investment company with a portfolio currently worth $215 million. It has liabilities of $6 million and 4 million shares outstanding.

The Closed Fund is a closed-end investment company with a portfolio currently worth $215 million. It has liabilities of $6 million and 4 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 $49 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 an % Discount from NAV.


Explanation: a.
NAV =
Market value of assets – Market value of liabilities
Shares outstanding

=  
$215,000,000 – $6,000,000
 = $52.25
4,000,000

b.
Premium (or discount) = 
Price – NAV 
 = 
$49 – $52.25
 = –0.0622 = –6.22%
NAV $52.25

The fund sells at an 6.22% discount from NAV.