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Suppose today a mutual fund contains 2,000 shares of JP Morgan Chase, currently trading at $46.75; 1,000 shares of Walmart, currently trading at $70.10; and 2,500 shares of Pfizer, currently trading at $27.50. The mutual fund has 10,000 shares outstanding held by investors.

(a) What is today's NAV of the fund?

(b) Calculate the updated NAV of the fund if tomorrow JP Morgan Chase's shares increase to $50, Walmart's shares increase to $73, and Pfizer shares increase to $30.

(c) Suppose that today 1,000 additional investors buy one share each of the mutual fund at the NAV of $23.235. This means that the fund manager has $23,235 additional funds to invest. The fund manager decides to use these additional funds to buy additional shares in JP Morgan Chase at today's price. Calculate tomorrow's NAV given the same rise in share values as assumed in part b.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91416943

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