City Street Fund has a portfolio of $415 million and liabilities of $15 million. a. If...

City Street Fund has a portfolio of $415 million and liabilities of $15 million.

a. If there are 80 million shares outstanding, what is net asset value?

Net asset value $

b-1. If a large investor redeems 3 million shares, what happens to the portfolio value? (Enter your answer in millions.)

Portfolio value (Click to select)increasesdecreases to $ million.

b-2. If a large investor redeems 3 million shares, what happens to shares outstanding? (Enter your answer in millions.)

Shares outstanding (Click to select)increasesdecreases to million.

b-3. If a large investor redeems 3 million shares, what is net asset value?

Net asset value $

Expert Solution

Solution:

a.	Net Asset value = $5

Working Notes:

	Net Asset value = (Portfolio value - Liabilities )/No of shares outstanding
	Net Asset value = ($415 million -$15 million )/ 80 million
	Net Asset value = $400 million / 80 million
	Net Asset value = $5

b-1.	Portfolio value decreases to $ 400 million

Working Notes:

	Change in portfolio value = Net assets value x No of shares redeems
	Change in portfolio value = $5 x 3 million
	Change in portfolio value = $15 million

	So , portfolio value will decreases by redeem value = Old portfolio value - Change in portfolio value
		= $415 million - $15 million
		=$400 million

Notes:	Net asset value = $5 taken from a.

b-2.	Shares outstanding decreases to 77 million

Working Notes:

	New shares outstanding = old shares outstanding - no of shares redeem
		= 80 million - 3 million
		=77 million

b-3.	Net Asset value = $5



	Net Asset value = (new Portfolio value - Liabilities )/No of shares outstanding
	Net Asset value = ($400 million -$15 million )/ 77 million
	Net Asset value = $385 million / 77 million
	Net Asset value = $5


Please feel free to ask if anything about above solution in comment section of the question.

jeff jeffy answered 2 years ago

City Street Fund has a portfolio of $490 million and liabilities of $10 million. a. If...

City Street Fund has a portfolio of $490 million and liabilities of $10 million. a. If there are 30 million shares outstanding, what is the net asset value? Net Asset Value: b-1. If a large investor redeems 1 million shares, what happens to the portfolio value? (Enter your answer in millions.) Portfolio value ___________ to _________ million b-2. If a large investor redeems 1 million shares, what happens to shares outstanding? (Enter your answer in millions.) Portfolio value ___________ to...

The Balance Sheet of the Street and Highway Fund of the City of Monroe as of...

The Balance Sheet of the Street and Highway Fund of the City of Monroe as of December 31, 2019, follow. CITY OF MONROE Street and Highway Fund Balance Sheet As of December 31, 2019 Assets Cash $ 19,000 Investments 63,000 Due from state government 107,000 Total assets $ 189,000 Liabilities and Fund Equity Liabilities: Accounts payable $ 10,000 Fund equity: Fund balance—assigned for streets and highways 179,000 Total liabilities and fund equity $ 189,000 3-C. This portion of the continuous...

PORTFOLIO BETA A mutual fund manager has a $20 million portfolio with a beta of 1.50....

PORTFOLIO BETA A mutual fund manager has a $20 million portfolio with a beta of 1.50. The risk-free rate is 6.00%, and the market risk premium is 5.0%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 12%. What should be the average beta of the new stocks added to the portfolio? Do not round intermediate calculations....

Suppose that you manage a pension fund that has liabilities of $2 million, $4 million, $8...

Suppose that you manage a pension fund that has liabilities of $2 million, $4 million, $8 million, and $10 million coming due in 1, 2, 3, and 4 years, respectively. You want to invest in bonds whose cash flows will exactly match the liabilities. The following bonds are available: 1-year, 2-year, 3-year, and 4-year annual-coupon bonds selling at par; the yields (YTMs) are 1%, 2%, 3%, and 4%, respectively. What's the necessary dollar amount of investment in 1-year bond today?

A fund manager is managing a bond portfolio against her client's liabilities. The liability has a...

A fund manager is managing a bond portfolio against her client's liabilities. The liability has a duration of 5 years and a market value of $100,000. The fund manager can immunize this liability using the following assets: 1) A perpetuity that pays $100 per annum. 2) A zero coupon bond with two years until maturity and a face value of $1000. The market yield for bonds of all maturities is 10% p.a. Calculate how many of the zero coupon bonds...

The European Growth Fund has $820 million in assets and $76,000 in liabilities. There are 30.5...

The European Growth Fund has $820 million in assets and $76,000 in liabilities. There are 30.5 million shares outstanding. The charge a 4.4% front-end load. What is the market price of the fund? a. 26.47 b. 29.74 c. 27.54 d.28.12 e. 26.08

A closed-end fund has total assets of $450 million and liabilities of $250,000. Currently, 25 million...

A closed-end fund has total assets of $450 million and liabilities of $250,000. Currently, 25 million shares are outstanding. What is the NAV of the fund? If the shares currently sell for $18.15, what is the premium or discount on the fund? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the NAV answer to 2 decimal places. Enter the premium or discount as a percent rounded to 2 decimal places.) Net asset...

Tree row bank has assets of $150 million, liabilities of $135 million, and equity of $15...

Tree row bank has assets of $150 million, liabilities of $135 million, and equity of $15 million. The asset duration is six years and the duration of the liabilities is four years. Market interest rates are 10 percent. Tree row bank wishes to hedge the balance sheet with treasury bond futures contracts, which currently have a prim quote of $95 per $100 face value for the benchmark 20-year, 8 percent coupon underlying the contract, a market yield of 8.5295 percent,...

Tree Row Bank has assets of $150 million, liabilities of $135 million, and equity of $15...

Tree Row Bank has assets of $150 million, liabilities of $135 million, and equity of $15 million. The asset duration is six years and the duration of the liabilities is four years. Market interest rates are 10 percent. Tree Row Bank wishes to hedge the balance sheet with Treasury bond futures contracts, which currently have a price quote of $95 per $100 face value for the benchmark 20-year, 8 percent coupon bond underlying the contract, a market yield of 8.5295...

A fund manager has a portfolio worth $10 million with a beta of 0.85. The manager...

A fund manager has a portfolio worth $10 million with a beta of 0.85. The manager is concerned about the performance of the market over the next months and plans to use 3-month futures contracts on the S&P 500 to hedge the risk. The current level of the index is 2,800, one contract is 250 times the index, the risk-free rate is 3% per annum, and the dividend yield on the index is 1% per annum. a) Calculate the theoretical...

Question