Question

Consider a mutual fund that manages a portfolio of securities worth $210 million. Suppose the fund owes $5 million to its investment advisers and another $4 million for rent, wages due, and miscellaneous expenses. The fund has 5 million shares outstanding. Net asset value?

Answer 1

Net asset value?

Answer: $40.20

Working

Formula for calculating Net asset Value is as follows,

Number of units outstanding = Number of shares outstanding = 5 million (provided in the Question)

Since in the question Net Assets of the scheme is not provided we need to find out

Details given in the question that will help us in calculating Net Assets of the Scheme are:

Market value of investments = portfolio worth = $210 million

Accrued expenses = Rent, wage due and miscellaneous expenses = $4 million.

Other liability/other payable = due to investment advisor = $5 million

(Note: Since othe infomations are not provided in the question, Net Assets of the Scheme is calculated with available informations)

Therefore, Net Assets of the Scheme       = $210 million - $4 million - $5 Million

                                                                     =$201 million

Number of units outstanding = Number of shares outstanding = 5 million (provided in the Question)

Calculation of Net Asset Value

         Net Asset Value                     = $201 million / 5 million

                                                         =$40.20