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Accounting

Problem:

A mutual fund has 400 shares of General Electric, currently trading at $10, and 500 shares of Microsoft, Inc., currently trading at $35. The fund has 1,200 shares outstanding.

Required:

Question 1: What is the NAV of the fund?

Question 2: If investors expect the price of General Electric to increase to $20 and the price of Microsoft to decline to $20 by the end of the year, what is the expected NAV at the end of the year?

Question 3: Assume that the price of General Electric shares does change to $20. What is the lowest price to which Microsoft can decline that will still maintain the same NAV as estimated in (a)?

Note: Please describe comprehensively and provide step by step solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167481

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